tag:blogger.com,1999:blog-8974567744861538412015-03-18T02:58:59.963-07:00VIX and MoreBill Lubyhttp://www.blogger.com/profile/01241003017364820134noreply@blogger.comBlogger1694125VixAndMorehttps://feedburner.google.comtag:blogger.com,1999:blog-897456774486153841.post-89603985752810898752015-01-27T22:12:00.001-08:002015-01-27T22:12:34.165-08:00Average Annual Normalized VIX Futures Term Structure, 2004-2014<p>One graphic I post periodically that never fails to generate a great deal of interest among traders, strategists and other volatility aficionados is my normalized <a href="http://vixandmore.blogspot.com/search/label/VIX%20futures">VIX futures</a> <a href="http://vixandmore.blogspot.com/search/label/term%20structure">term structure</a> graph. From 2008 – 2013, the annual normalized term structure was notable in that almost every year was an outlier in one way or another. For instance, 2012 and 2013 were the two years with the steepest <a href="http://vixandmore.blogspot.com/search/label/contango">contango</a> in history, while 2008, 2009 and 2011 represent three of the four years (2007 being the fourth) with the flattest term structure.</p> <p>And 2014? It could not have been more average. If one combines all the years from 2004 to 2014 and creates an “average year” (i.e., the wide gray line on the chart) then 2014 (double blue line) comes closest to that average.</p> <p align="center"><a href="http://lh3.ggpht.com/-bZzwjNdqI7E/VMh9zJciHnI/AAAAAAAAJZE/AiO1o-3bLLo/s1600-h/Normalized%252520VIX%252520Futures%252520Term%252520Structure%25252C%2525202004-2014%25255B4%25255D.png"><img title="Normalized VIX Futures Term Structure, 2004-2014" style="border-top: 0px; border-right: 0px; border-bottom: 0px; border-left: 0px; display: inline" border="0" alt="Normalized VIX Futures Term Structure, 2004-2014" src="http://lh6.ggpht.com/-LF00U-gTO5w/VMh90MEJcPI/AAAAAAAAJZM/EYoHgAWharU/Normalized%252520VIX%252520Futures%252520Term%252520Structure%25252C%2525202004-2014_thumb%25255B2%25255D.png?imgmax=800" width="1092" height="530" /></a> </p> <p align="center"><i>[source(s): CBOE, VIX and More]</i></p> <p>Note that the terms structure lines are dotted and somewhat wavy for 2004 – 2006, due to the fact that the CBOE did not implement a full complement of consecutive monthly futures until October 2006.</p> <p>As for 2015, which is not plotted on the graph above, so far it looks quite flat, almost like a cross between 2007 and 2009. It will be interesting to see if this pattern holds for the balance of the year.</p> <p>Related posts:</p> <ul> <li><a href="http://vixandmore.blogspot.com/2013/12/vix-futures-term-structure-in-2013.html">VIX Futures Term Structure in 2013 Looks a Lot Like 2012</a></li> <li><a href="http://vixandmore.blogspot.com/2012/10/the-2012-vix-futures-term-structure-as.html">The 2012 VIX Futures Term Structure as an Outlier</a></li> <li><a href="http://vixandmore.blogspot.com/2013/11/the-evolution-of-holiday-effect-in-vix.html">The Evolution of the Holiday Effect in VIX Futures</a></li> <li><a href="http://vixandmore.blogspot.com/2013/09/revisiting-vixvxv-ratio.html">Revisiting the VIX:VXV Ratio</a></li> <li><a href="http://vixandmore.blogspot.com/2012/07/crazy-vixvxv-ratio-chart.html">Crazy VIX:VXV Ratio Chart</a></li> <li><a href="http://vixandmore.blogspot.com/2013/10/the-new-vxst-and-vxstvix-ratio.html">The New VXST and the VXST:VIX Ratio</a></li> <li><a href="http://vixandmore.blogspot.com/2012/10/violent-disagreement-across-vix-futures.html">Violent Disagreement Across VIX Futures</a></li> <li><a href="http://vixandmore.blogspot.com/2012/06/tracking-fall-in-vix-futures.html">Tracking the Fall in VIX Futures</a></li> <li><a href="http://vixandmore.blogspot.com/2012/03/third-steepest-first-second-vix-futures.html">Third Steepest First-Second Month VIX Futures Contango Ever</a></li> <li><a href="http://vixandmore.blogspot.com/2011/11/vix-futures-tale-of-two-backwardations.html">VIX Futures: A Tale of Two Backwardations</a></li> <li><a href="http://vixandmore.blogspot.com/2011/11/new-vix-backwardation-record.html">New VIX Backwardation Record</a></li> <li><a href="http://vixandmore.blogspot.com/2011/08/vix-backwardation-commentary.html">VIX Backwardation Commentary</a></li> <li><a href="http://vixandmore.blogspot.com/2011/08/vix-term-structure-evolution-over-last.html">VIX Term Structure Evolution Over Last Ten Days</a></li> <li><a href="http://vixandmore.blogspot.com/2010/10/capitulation-in-back-month-vix-futures.html">Capitulation in Back Month VIX Futures</a></li> <li><a href="http://vixandmore.blogspot.com/2010/09/vix-futures-what-wereare-they-thinking.html">VIX Futures: What Were/Are They Thinking?</a></li> <li><a href="http://vixandmore.blogspot.com/2008/12/vix-term-structure-chances-since.html">VIX Term Structure Changes Since November 20th</a></li> <li><a href="http://vixandmore.blogspot.com/2012/02/monitoring-vix-futures-and-their-impact.html">Monitoring VIX Futures and Their Impact on VIX ETPs</a></li> <li><a href="http://vixandmore.blogspot.com/2009/05/vxx-calculations-vix-futures-and-time.html">VXX Calculations, VIX Futures and Time Decay</a></li> </ul> <p><b><i>Disclosure(s): </i></b><i>the CBOE is an advertiser on VIX and More</i></p> <img src="//feeds.feedburner.com/~r/VixAndMore/~4/5PTeNEpR6ns" height="1" width="1" alt=""/>Bill Lubyhttp://www.blogger.com/profile/01241003017364820134noreply@blogger.comhttp://vixandmore.blogspot.com/2015/01/average-annual-normalized-vix-futures.htmltag:blogger.com,1999:blog-897456774486153841.post-21677726109945374042015-01-25T22:41:00.001-08:002015-01-25T22:47:23.313-08:00The Year in VIX and Volatility (2014)<p>This is the seventh year in a row I have offered a retrospective look at the year in VIX and Volatility, which is my attempt to cram some of the highlights of the year in volatility onto one <strike>eye chart</strike> graphic with a (somewhat) manageable number of annotations.</p> <p>In aggregate, 2014 was a very quiet year for the VIX, with a mean close of just 14.19 for the year, which is the lowest the VIX has been since 2006 and third lowest since 1995. On the other hand, as I recently documented, <a href="http://vixandmore.blogspot.com/search/label/VIX%20spikes">VIX spikes</a> were common last year, with 2014 registering the <a href="http://vixandmore.blogspot.com/2015/01/2014-had-third-highest-number-of-20-vix.html">third highest number of 20% VIX spikes</a> since the beginning of VIX data, in 1990. In short, the VIX was susceptible to large spikes, but these were typically followed by strong <a href="http://vixandmore.blogspot.com/search/label/mean%20reversion">mean-reverting</a> declines. For example, the peak VIX of 31.06 on October 15 was the highest VIX reading since 2011, yet just six weeks later the VIX was back in the 11s.</p> <p>When asked in October what they perceived as the biggest threat to stocks, respondents to the <i>VIX and More</i> fear poll pointed to the end of quantitative easing and the removal of the Fed safety net as their top concern, with <a href="http://vixandmore.blogspot.com/search/label/Ebola">Ebola</a> narrowly edging out the much more nebulous “market technical factors” for the second slot. As best as I am able to determine, it was the panic associated with <a href="http://vixandmore.blogspot.com/search/label/fear">fears</a> of an Ebola epidemic that took an already elevated VIX and pushed it up into the 30s.</p> <p>At various times during the year, <a href="http://vixandmore.blogspot.com/search/label/Ukraine">Ukraine</a>/<a href="http://vixandmore.blogspot.com/search/label/Russia">Russia</a>, <a href="http://vixandmore.blogspot.com/search/label/crude%20oil">crude oil</a>, ISIS/ISIL, <a href="http://vixandmore.blogspot.com/search/label/Israel">Israel</a>/Gaza, <a href="http://vixandmore.blogspot.com/search/label/FOMC">the Fed</a> and the European Central Bank all managed to increase anxiety and perceptions of risk among investors. Also, the narrow miss in the vote for Scottish independence created turmoil in the United Kingdom and across the euro zone, but managed to avoid morphing into another nationalist crisis. Early in the year, there was a <a href="http://vixandmore.blogspot.com/search/label/currencies">currency</a> crisis in <a href="http://vixandmore.blogspot.com/search/label/emerging%20markets">emerging markets</a> that was triggered by (unfounded, in retrospect) concerns about higher interest rates in the U.S. Throughout the year there were concerns about valuations and excesses momentum trading in the likes of <a href="http://vixandmore.blogspot.com/search/label/biotech">biotechnology</a>, social media, internet and solar stocks. To some extent, these concerns peaked in April (see <a href="http://vixandmore.blogspot.com/2014/04/the-correction-as-seen-in-etp-landscape.html">The Correction as Seen in the ETP Landscape</a> for additional details), only to return periodically throughout the balance of the year.</p> <p align="center"><i><a href="http://lh4.ggpht.com/-lWCOWU2wCtQ/VMXhYcQ1bFI/AAAAAAAAJYs/Dhvrl_XEYgw/s1600-h/The%252520Year%252520in%252520VIX%252520and%252520Volatility%2525202014%25255B8%25255D.png"><img title="The Year in VIX and Volatility 2014" style="border-top: 0px; border-right: 0px; border-bottom: 0px; border-left: 0px; display: inline" border="0" alt="The Year in VIX and Volatility 2014" src="http://lh4.ggpht.com/-4nmDYWjB0h4/VMXhkQrJrWI/AAAAAAAAJY0/D86UzgygBbc/The%252520Year%252520in%252520VIX%252520and%252520Volatility%2525202014_thumb%25255B6%25255D.png?imgmax=800" width="1024" height="687" /></a> </i></p> <p align="center"><i>[source(s): StockCharts.com, VIX and More]</i></p> <p>Last year at this time, the prevailing worries were focused on whether or not Fed Chair Janet Yellen was leaning toward a more hawkish stance, the inevitable march to higher interest rates in the U.S., the weakening of emerging markets currencies and the potential fallout from the Fed’s tapering of bond purchases. In retrospect, investors were largely worrying about the wrong things.</p> <p>The first few weeks of 2015 have seen <a href="http://vixandmore.blogspot.com/search/label/Greece">Greece</a>, Saudi Arabia and Ukraine back in the spotlight, with the Swiss National Bank and European Central Bank dominating news on the central banking front. If the past is any guide, the big issue for 2015 has yet to rear its ugly head, whether it turns out to be a gray, charcoal or black swan.</p> <p>Related posts:</p> <ul> <li><a href="http://vixandmore.blogspot.com/2014/01/the-year-in-vix-and-volatility-2013.html">The Year in VIX and Volatility (2013)</a></li> <li><a href="http://vixandmore.blogspot.com/2013/01/the-year-in-vix-and-volatility-2012.html">The Year in VIX and Volatility (2012)</a></li> <li><a href="http://vixandmore.blogspot.com/2012/01/year-in-vix-and-volatility-2011.html">The Year in VIX and Volatility (2011)</a></li> <li><a href="http://vixandmore.blogspot.com/2011/01/year-in-vix-and-volatility-2010.htmlhttp:/vixandmore.blogspot.com/2011/01/chart-of-week-year-in-economic-data.html">The Year in VIX and Volatility, 2010</a></li> <li><a href="http://vixandmore.blogspot.com/2010/01/chart-of-week-vix-and-volatility-in.html">Chart of the Week: The VIX and Volatility in 2009</a></li> <li><a href="http://vixandmore.blogspot.com/2009/01/year-in-global-volatility.html">The Year in Global Volatility (2008)</a></li> <li><a href="http://vixandmore.blogspot.com/2015/01/2014-had-third-highest-number-of-20-vix.html">2014 Had Third Highest Number of 20% VIX Spikes</a></li> <li><a href="http://vixandmore.blogspot.com/2014/04/the-correction-as-seen-in-etp-landscape.html">The Correction as Seen in the ETP Landscape</a></li> </ul> <p><b><i>Disclosure(s): </i></b><i>none</i></p> <img src="//feeds.feedburner.com/~r/VixAndMore/~4/fPhKwR8jB6M" height="1" width="1" alt=""/>Bill Lubyhttp://www.blogger.com/profile/01241003017364820134noreply@blogger.comhttp://vixandmore.blogspot.com/2015/01/the-year-in-vix-and-volatility-2014.htmltag:blogger.com,1999:blog-897456774486153841.post-13576259995234122302015-01-25T14:46:00.001-08:002015-01-25T14:46:02.541-08:00Top Posts of 2014<p>Since I launched <em>VIX and More</em> some eight plus years ago, I have devoted one post to highlighting the top 25 most-read posts of each year. I do this in part for archival purposes: to see what is important to readers and how their interest in various issues changes over time. I also hope that these aggregations of most-read posts will serve as relatively easily accessible repositories of high-quality material for the benefit of new readers and long-term readers alike.</p> <p>During 2014, the blog saw an extended hiatus for the first time in its history, largely due to events arising from the passing of my father. For this reason, I am limiting the number of top posts for the year to thirteen, largely because <a href="http://vixandmore.blogspot.com/2014/10/song-for-my-father.html">Song for My Father*</a> ended the year in the #13 slot.</p> <p>Looking ahead, volatility is back and so am I. I miss writing and I miss the interaction with readers. In the coming year I will significantly ramp up my activity on the blog and also in the comments section. I will also continue to write a weekly <a href="http://vixandmoresubscriber.blogspot.com/">newsletter</a> specializing in volatility (which just so happens to have a 14-day free trial), pen periodic <a href="http://vixandmore.blogspot.com/2014/11/how-to-ride-aging-bull-guest-columnist.html">guest columns for Barron’s</a> and perhaps contribute to some other publications as well.&#160; All this will be in addition to my primary role, which is that of an investment manager.</p> <p>In 2014, some of the top stories were <a href="http://vixandmore.blogspot.com/search/label/Ebola">Ebola</a>, <a href="http://vixandmore.blogspot.com/search/label/Ukraine">Ukraine</a> vs. <a href="http://vixandmore.blogspot.com/search/label/Russia">Russia</a>, <a href="http://vixandmore.blogspot.com/search/label/crude%20oil">crude oil</a>, ISIS/ISIL, <a href="http://vixandmore.blogspot.com/search/label/FOMC">the Fed</a> and the European Central Bank.&#160; The posts below represent those that have been read by the highest number of unique readers during 2014. Farther down there are links to similar lists going back to 2008, along with several other “best of” type posts that I have flagged for <a href="http://vixandmore.blogspot.com/search/label/archival">archival</a> purposes. </p> <p>For the record, each year I also attach the <a href="http://vixandmore.blogspot.com/search/label/hall%20of%20famehttp:/vixandmore.blogspot.com/2007/01/week-in-vix-january-7-2007-introduction.html">hall of fame</a> label to a handful of posts that I believe have particularly compelling and/or original content, regardless of readership. I was a tough grader last year, as I only added one new post to the HoF in 2014, but I already have an addition for 2015 and my goal is to continue to crank out Hall-of-Fame-worthy posts on a regular basis in 2015 – and even manage to do it without assistance provided by performance-enhancing drugs…</p> <p>With an increase in posting on the blog, I also foresee a substantial uptick in my activity on Twitter, where <a href="https://twitter.com/VIXandMore">@VIXandMore</a> gives me a platform to contribute more in terms of time-sensitive news, short-term insights and other related subjects.</p> <p>The thirteen most-read posts on <em>VIX and More</em> in 2014 were:</p> <ul> <li><a href="http://vixandmore.blogspot.com/2014/05/low-volatility-how-to-profit-from-quiet.html">Low Volatility: How to Profit From a Quiet VIX (Guest Columnist at Barron’s)</a></li> <li><a href="http://vixandmore.blogspot.com/2014/04/the-correction-as-seen-in-etp-landscape.html">The Correction as Seen in the ETP Landscape</a></li> <li><a href="http://vixandmore.blogspot.com/2014/10/largest-spx-pullback-of-2014-hits-64.html">Largest Pullback of 2014 Hits 6.4%</a></li> <li><a href="http://vixandmore.blogspot.com/2014/02/a-very-middling-pullback-so-far.html">A Very Middling Pullback So Far</a></li> <li><a href="http://vixandmore.blogspot.com/2014/01/was-vix-too-low-in-2013-no.html">Was the VIX Too Low in 2013? No…</a></li> <li><a href="http://vixandmore.blogspot.com/2014/01/vxx-and-vxz-now-five-years-old.html">VXX and VXZ Now Five Years Old!</a></li> <li><a href="http://vixandmore.blogspot.com/2014/03/vix-march-futures-and-options.html">VIX March Futures and Options Expiration on Tuesday, Not Wednesday</a></li> <li><a href="http://vixandmore.blogspot.com/2014/01/performance-of-vix-etps-in-2013.html">Performance of VIX ETPs in 2013</a></li> <li><a href="http://vixandmore.blogspot.com/2014/01/the-year-in-vix-and-volatility-2013.html">The Year in VIX and Volatility (2013)</a></li> <li><a href="http://vixandmore.blogspot.com/2014/10/fear-poll-fedqe-ebola-and-technicals.html">Fear Poll: Fed/QE, Ebola and Technicals Top Worry List</a></li> <li><a href="http://vixandmore.blogspot.com/2014/11/how-to-ride-aging-bull-guest-columnist.html">How to Ride an Aging Bull (Guest Columnist at Barron’s)</a></li> <li><a href="http://vixandmore.blogspot.com/2014/03/the-turnaround-in-emerging-markets-and.html">The Turnaround in Emerging Markets and VXEEM</a></li> <li><a href="http://vixandmore.blogspot.com/2014/10/song-for-my-father.html">Song for My Father*</a></li> </ul> <p>Related posts:</p> <ul> <li><a href="http://vixandmore.blogspot.com/2014/01/top-posts-of-2013.html">Top Posts of 2013</a></li> <li><a href="http://vixandmore.blogspot.com/2012/12/top-posts-of-2012.html">Top Posts of 2012</a></li> <li><a href="http://vixandmore.blogspot.com/2011/12/top-posts-of-2011.html">Top Posts of 2011</a></li> <li><a href="http://vixandmore.blogspot.com/2010/12/top-posts-of-2010.html">Top Posts of 2010</a></li> <li><a href="http://vixandmore.blogspot.com/2009/12/top-posts-of-2009.html">Top Posts of 2009</a></li> <li><a href="http://vixandmore.blogspot.com/2008/12/top-posts-of-2008.html">Top Posts of 2008</a></li> <li><a href="http://vixandmore.blogspot.com/2008/01/one-year-blogiversary.html">One Year Blogiversary!</a> (includes top 25 posts of 2007) </li> <li><a href="http://vixandmore.blogspot.com/2009/06/1000th-post.html">The 1000<sup>th</sup> Post</a></li> <li><a href="http://vixandmore.blogspot.com/2012/01/five-years-of-vix-and-more.html">Five Years of VIX and More</a></li> <li><a href="http://vixandmore.blogspot.com/search/label/hall%20of%20fame">The VIX and More Hall of Fame</a></li> </ul> <p><b><i>Disclosure(s): </i></b><i>none</i></p> <img src="//feeds.feedburner.com/~r/VixAndMore/~4/320gPsopppY" height="1" width="1" alt=""/>Bill Lubyhttp://www.blogger.com/profile/01241003017364820134noreply@blogger.comhttp://vixandmore.blogspot.com/2015/01/top-posts-of-2014.htmltag:blogger.com,1999:blog-897456774486153841.post-85966338699141230632015-01-06T09:58:00.001-08:002015-01-25T14:27:37.558-08:002014 Had Third Highest Number of 20% VIX Spikes<p>By most measures, one would think that 2014 was a relatively quiet year for the VIX and equity volatility in general. In fact, the average VIX of 14.19 was the lowest for the full year since 2006 and the third lowest going back to 1995. Of course, averages can be misleading and just as you can drown in a river with an average depth of one inch, anyone who was short the VIX when it spiked all the way up to 31.06 in October knows that minimum and maximum readings are important.</p> <p>With this in mind, the chart below shows the number of 20% one-day <a href="http://vixandmore.blogspot.com/search/label/VIX%20spikes">VIX spikes</a> per year, going back to 1990. Note that when looked through the lens of those 20% spikes, 2014 was the third most volatile year for the VIX since 1990, with the same number of 20% VIX spikes as <a href="http://vixandmore.blogspot.com/search/label/2008">2008</a>! Additionally, if one were to round up a near miss from December 8<sup>th</sup>, last year would move into a tie for the #2 slot, just behind the euro zone carnage from 2011.</p> <p align="center"><a href="http://lh4.ggpht.com/-XLsyHN5DV8c/VKwiIihVp_I/AAAAAAAAJXQ/95YYVxEjfmA/s1600-h/VIXspikesbyyearthru010515_zpse2baffc9%25255B1%25255D%25255B4%25255D.png"><img title="VIXspikesbyyearthru010515_zpse2baffc9[1]" style="border-left-width: 0px; border-right-width: 0px; border-bottom-width: 0px; display: inline; border-top-width: 0px" border="0" alt="VIXspikesbyyearthru010515_zpse2baffc9[1]" src="http://lh3.ggpht.com/--aoO6TrSbdU/VKwiJkMs-FI/AAAAAAAAJXY/WHZnSYU5ShE/VIXspikesbyyearthru010515_zpse2baffc9%25255B1%25255D_thumb%25255B2%25255D.png?imgmax=800" width="893" height="327" /></a> </p> <p align="center"><i>[source(s): CBOE, VIX and More]</i></p> <p>Perhaps the most interesting thing about the 20% VIX spikes is that two of them came during the last month of the year and with a little rounding, the December 8<sup>th</sup> spike could have been number three. Toss in yesterday’s 28.1% VIX spike and that is <em>four VIX spikes of at least 19.5% in one month</em>. Uncharted territory? Not quite, with August <a href="http://vixandmore.blogspot.com/search/label/2011">2011</a> having already marched down that path, but something not achieved in any other year, including 2008 or at any time during the bursting of the dotcom bubble.</p> <p>The have been a number of important changes in the volatility space during the past year or so and going forward I will address quite a few of them, with additional analysis and commentary.</p> <p>Related posts:</p> <ul> <li><a href="http://vixandmore.blogspot.com/2013/02/all-time-vix-spike-11-and-treasure.html">All-Time VIX Spike #11 (and a treasure trove of VIX spike data)</a> </li> <li><a href="http://vixandmore.blogspot.com/2012/02/biggest-vix-spike-ever-retrospective.html">The Biggest VIX Spike Ever: A Retrospective</a> </li> <li><a href="http://vixandmore.blogspot.com/2011/08/vix-sets-some-new-records-suggesting.html">VIX Sets Some New Records, Suggesting Volatility Near Peak</a> </li> <li><a href="http://vixandmore.blogspot.com/2010/06/highest-intraday-vix-readings.html">Highest Intraday VIX Readings</a> </li> <li><a href="http://vixandmore.blogspot.com/2010/04/short-term-and-long-term-implications.html">Short-Term and Long-Term Implications of the 30% VIX Spike</a> </li> <li><a href="http://vixandmore.blogspot.com/2009/10/vix-spike-of-35-in-four-days-is-short.html">VIX Spike of 35% in Four Days Is Short-Term Buy Signal</a> </li> <li><a href="http://vixandmore.blogspot.com/2007/04/lessons-from-post-227-vix-price-action.html">Lessons from the Post-2/27 VIX Price Action</a> </li> <li><a href="http://vixandmore.blogspot.com/2010/05/vix-approaches-pre-2008-record-highs.html">VIX Approaches Pre-2008 Record Highs</a> </li> <li><a href="http://vixandmore.blogspot.com/2008/10/vxo-chart-from-1987-1988-and.html">VXO Chart from 1987-1988 and Explanation of VIX vs. VXO</a> </li> <li><a href="http://vixandmore.blogspot.com/2008/03/volatility-history-lesson-1987.html">Volatility History Lesson: 1987</a> </li> <li><a href="http://vixandmore.blogspot.com/2012/12/volatility-during-crises.html">Volatility During Crises</a> </li> <li><a href="http://vixandmore.blogspot.com/2009/04/chart-of-week-vxv-and-systemic-failure.html">Chart of the Week: VXV and Systemic Failure</a> </li> <li><a href="http://vixandmore.blogspot.com/2012/06/euro-volatility-and-risk.html">Euro Volatility and Risk</a> </li> <li><a href="http://vixandmore.blogspot.com/2012/06/evolution-of-european-equity-risk.html">The Evolution of European Equity Risk</a> </li> <li><a href="http://vixandmore.blogspot.com/2009/07/forces-acting-on-vix.html">Forces Acting on the VIX</a> </li> <li><a href="http://vixandmore.blogspot.com/2008/10/conceptual-framework-for-volatility.html">A Conceptual Framework for Volatility Events</a> </li> </ul> <p><b><i>Disclosure(s): </i></b><i>short VIX at time of writing</i></p> <img src="//feeds.feedburner.com/~r/VixAndMore/~4/pSvB-NxBb1M" height="1" width="1" alt=""/>Bill Lubyhttp://www.blogger.com/profile/01241003017364820134noreply@blogger.comhttp://vixandmore.blogspot.com/2015/01/2014-had-third-highest-number-of-20-vix.htmltag:blogger.com,1999:blog-897456774486153841.post-87856886367836502392014-11-30T18:50:00.001-08:002014-11-30T19:06:12.741-08:00How to Ride an Aging Bull (Guest Columnist at Barron’s)<p>Yesterday marked the fifteenth time I have served as a guest columnist for <a href="http://online.barrons.com/public/search/results.html?HEADER_TEXT=The%20Striking%20Price%20Daily&amp;article-doc-type=%7bThe+Striking+Price+Daily%7d&amp;mod=BOL_article_full_more">The Striking Price</a> at Barron’s and <a href="http://online.barrons.com/articles/how-to-ride-an-aging-bull-1417239597">How to Ride an Aging Bull</a> is one of the few articles I have written for Barron’s that has not focused almost exclusively on the VIX and volatility.</p> <p>In the Barron’s article I note that pundits have been calling this “the most hated bull market ever” for about three years and partly as a result of the mistrust of large bull moves, many retail investors have exited the market when they feared prices were getting ahead of themselves. As stocks have continued to rally, these same investors have had difficulty getting back in at even higher prices. Now, with 2015 just around the corner, quite a few of these investors believe stocks can continue to move higher and are wondering how they might be able to take advantage of a continued rally even though they believe the six-year bull is too long in the tooth.</p> <p>An approach I discuss in the Barron’s article is one of seeking out value in underperforming sectors. In the article I cited the energy sector as the headline underperformer, but noted that while the energy sector ETP (<a href="http://vixandmore.blogspot.com/search/label/XLE">XLE</a>) is down 8.5% year-to-date, the metals and mining sector ETP (<a href="http://vixandmore.blogspot.com/search/label/XME">XME</a>) is down 18.7% for the year. <i>[Unfortunately, due to an editing snafu, the updated numbers I provided using data following the OPEC meeting were not incorporated into the publication.]</i></p> <p>The XME March 33/38 <a href="http://vixandmore.blogspot.com/search/label/risk%20reversal">risk reversal</a> trade (short the March 33 put; long the March 38 call) cited in the Barron’s article uses strikes and prices that are quite stale now that OPEC has decided not to cut production. An updated version of the trade that would still generate a small credit would use the March 32 and 37 strikes, with a profit and loss chart that looks like the one below. Note that if XME is between 32 and 37 at expiration, the trade will generate a small profit. Should XME settle below 32 at expiration, the risk reversal (blue line) would lose about 2.24 less than holding the underlying (dotted gray line); if XME settles above 37 at expiration, the risk reversal gains would be about 2.76 less than if one had held the underlying.</p> <p align="center"><a href="http://lh3.ggpht.com/-9hY2sOwzKcQ/VHvXdFWjLmI/AAAAAAAAJV4/d1NOr0Bd1Qg/s1600-h/XME%252520March%2525202015%252520Risk%252520Reversal%252520112914%25255B5%25255D.png"><img title="XME March 2015 Risk Reversal 112914" style="border-top: 0px; border-right: 0px; border-bottom: 0px; border-left: 0px; display: inline" border="0" alt="XME March 2015 Risk Reversal 112914" src="http://lh5.ggpht.com/-HqVkNIGDbhU/VHvXd4u2jpI/AAAAAAAAJWA/9qcQ3RH5WkI/XME%252520March%2525202015%252520Risk%252520Reversal%252520112914_thumb%25255B3%25255D.png?imgmax=800" width="1034" height="636" /></a> </p> <p align="center"><i>[source(s): VIXandMore]</i></p> <p>While metals and mining have had a difficult year, the recent rate cut by the People’s Bank of China and the anticipated near-term stimulus measures from the European Central Bank should provide a lift to metals and mining stocks. Other factors, including continued strong U.S. economic growth, could also bolster XME, which focuses mainly on steel, coal and aluminum for the U.S. market.</p> <p>As noted in the Barron’s article, one could also make a similar trade with one of XME’s most liquid components, Alcoa (<a href="http://vixandmore.blogspot.com/search/label/AA">AA</a>), where a short February 16/19 risk reversal has a similar profit and loss potential, yet taps into one of the metals and mining sectors, aluminum, that has been a very strong performer in 2014. As Alcoa’s options market is more liquid than that of XME, the single-stock version of this risk reversal should be considered as an alternative way of achieving similar exposure.</p> <p>Related posts:</p> <ul> <li><a href="http://vixandmore.blogspot.com/2012/08/a-vix-risk-reversal.html">A VIX Risk Reversal</a></li> <li><a href="http://vixandmore.blogspot.com/2008/05/agricultural-commodities-vs-base-metals.html">Agricultural Commodities vs. Base Metals</a></li> <li><a href="http://vixandmore.blogspot.com/2009/05/chart-of-week-breaking-out-recent.html">Breaking Out Recent Commodities Moves</a></li> <li><a href="http://vixandmore.blogspot.com/2008/08/energy-sector-weekly-chart-and-support.html">Energy Sector Weekly Chart and Support Levels</a></li> <li><a href="http://vixandmore.blogspot.com/2008/07/sector-performance-in-last-two-bull.html">Sector Performance in the Last Two Bull Moves</a></li> <li><a href="http://vixandmore.blogspot.com/2008/04/energy-and-materials-rally.html">The Energy and Materials Rally</a></li> <li><a href="http://vixandmore.blogspot.com/2007/12/technology-energy-and-bulls.html">Technology, Energy and Bulls</a></li> </ul> <p>A full list of my Barron’s contributions:</p> <ul> <li><a href="http://online.barrons.com/articles/how-to-ride-an-aging-bull-1417239597">How to Ride an Aging Bull</a> (November 29, 2014)</li> <li><a href="http://online.barrons.com/news/articles/SB50001424053111904248904580005080448123698">Investors' Best Options in a ‘No Fear’ Market</a> (July 2, 2014)</li> <li><a href="http://online.barrons.com/news/articles/SB50001424053111904554304579577934289682884">Low Volatility: How to Profit from a Quiet VIX</a> (May 22, 2014) </li> <li><a href="http://online.barrons.com/article/SB50001424053111903536004579467372137029220.html">Emerging Market Stocks: Have They Hit Bottom?</a> (March 28, 2014) </li> <li><a href="http://online.barrons.com/article/SB50001424052748704093404578609670858329206.html?mod=BOL_da_spd">How to Spot Risk Early</a> (July 16, 2013) </li> <li><a href="http://online.barrons.com/article/SB50001424052748703318404578430882101527030.html?mod=BOL_hps_highlight_mid">How to Insure Your Stock Portfolio</a> (April 18, 2013) </li> <li><a href="http://online.barrons.com/article/SB50001424052748703792204578217484255589840.html?mod=BOL_hps_highlight_bottom">The Case for Options Trading</a> (January 2, 2013) </li> <li><a href="http://online.barrons.com/article/SB50001424052748704526104578118984076144580.html">Calm Down and Exploit Others’ Anxieties</a> (November 14, 2012) </li> <li><a href="http://online.barrons.com/article/SB50001424053111904184504577518802209654274.html">How to Trade Options Around Volatile Events</a> (July 10, 2012) </li> <li><a href="http://online.barrons.com/article/SB50001424053111903935304577382010847832798.html?mod=BOL_hps_highlight_bottom">Be Greedy While Others Are Fearful</a> (May 3, 2012) </li> <li><a href="http://online.barrons.com/article/SB50001424052970204201404576077942647562616.html?mod=BOL_hps_dc">Ways to Turn Volatility into an Asset Class</a> (January 12, 2011) </li> <li><a href="http://online.barrons.com/article/SB50001424052970204743004575622694164710232.html">There’s Opportunity in Uncertainty</a> (November 18, 2010) </li> <li><a href="http://online.barrons.com/article/SB50001424052970204297404575493863568455090.html">Will Market Volatility Return to Crisis Levels?</a> (September 15, 2010) </li> <li><a href="http://online.barrons.com/article/SB127430948974994023.html">The Perils of Predicting Volatility</a> (May 20, 2010) </li> <li><a href="http://online.barrons.com/article/SB124648899704482887.html">Take a Longer View on Volatility</a> (July 2, 2009) </li> </ul> <p><b><i>Disclosure(s): </i></b><i>none</i></p> <img src="//feeds.feedburner.com/~r/VixAndMore/~4/1GhgHrwRQrw" height="1" width="1" alt=""/>Bill Lubyhttp://www.blogger.com/profile/01241003017364820134noreply@blogger.comhttp://vixandmore.blogspot.com/2014/11/how-to-ride-aging-bull-guest-columnist.htmltag:blogger.com,1999:blog-897456774486153841.post-23239781664009538042014-10-16T08:36:00.001-07:002015-01-25T14:26:14.549-08:00Fear Poll: Fed/QE, Ebola and Technicals Top Worry List<p>Stocks may be in the process of putting in a bottom, but with the VIX hitting 31.06 yesterday at the same time <a href="http://vixandmore.blogspot.com/search/label/VIX%20futures">VIX futures</a> were setting <a href="http://ir.cboe.com/~/media/Files/C/CBOE-Holdings-IR/press-release/2014/cboe-holdings-10-15-14-daily-volume-records.pdf">new volume records</a>, investor fear and anxiety is as high as it has been since the 2011 <a href="http://vixandmore.blogspot.com/search/label/European%20sovereign%20debt%20crisis">European sovereign debt crisis</a>.</p> <p>As the <a href="http://vixandmore.blogspot.com/search/label/Fear%20poll">VIX and More Fear Poll</a> results reflect, the current situation is particularly difficult for investors to grapple with because there is so much disagreement about what the biggest worry is and how some of these fears may be connected.</p> <p>In the chart below, I have summarized the almost 400 votes from some 35 countries, with the U.S. accounting for 65% of all respondents.</p> <p>It is worth noting that the responses appear to be somewhat headline driven, as yesterday <a href="http://vixandmore.blogspot.com/search/label/Ebola">Ebola</a> topped the list of worries, only to be supplanted by concerns about the impact of the Fed ending quantitative easing and in so doing removing the safety net that has helped keep liquidity high, volatility low and investors more confident. I also find it particularly interesting that “market technical factors (breach of support, end of trend, weak internals, etc.)” are so important to a broad range of investors, which raises the question of whether technicals are more of a cause or effect in the recent downturn.</p> <p>Looking at global economic weakness, slightly more investors expressed concern about the U.S. economy than that of the euro zone, with concerns about the Chinese economy a distant third.</p> <p>In these types of polls, I am always interested to see how U.S. respondents differ from those outside of the U.S. In the current market environment, U.S. respondents tend to place more emphasis on the weak U.S. economy and the Ebola virus, while paying less attention to currency issues and <a href="http://vixandmore.blogspot.com/search/label/China">China</a>. Some of the detailed results certainly have a whiff of provincialism, yet it remains to be seen whether the global or Americentric perspective does a better job of honing in on what to focus on – a subject I will delve into at a later date.</p> <p>For those who might be interested in the results of prior VIX and More Fear Poll data, the links below should be a helpful reference.</p> <p>Last but not least, many thanks to everyone who participated in this poll, which I intend to periodically reprise as market conditions warrant.</p> <p><a href="http://lh4.ggpht.com/-bZpWjaurWOQ/VD_m0LhsuzI/AAAAAAAAJUg/SKcSw5LheX4/s1600-h/VAM%252520Fear%252520Poll%252520101614%25255B4%25255D.png"><img title="VAM Fear Poll 101614" style="border-left-width: 0px; border-right-width: 0px; border-bottom-width: 0px; display: inline; border-top-width: 0px" border="0" alt="VAM Fear Poll 101614" src="http://lh3.ggpht.com/-1Sc_mksz2GQ/VD_m0lJ5l0I/AAAAAAAAJUo/VHsqS01blUA/VAM%252520Fear%252520Poll%252520101614_thumb%25255B2%25255D.png?imgmax=800" width="1102" height="629" /></a> </p> <p align="center"><i>[source(s): VIX and More]</i></p> <p>Related posts:</p> <ul> <li><a href="http://vixandmore.blogspot.com/2013/01/investor-fears-pivot-to-us-deficit-and.html">Investor Fears Pivot to U.S. Deficit and Debt Ceiling Following Cliff Deal</a> <br /><a href="http://vixandmore.blogspot.com/2012/12/just-change-of-venue-fears-about-us.html">Just a Change of Venue? (Fears About U.S. Deficit/Debt Ceiling Replacing Fiscal Cliff Worries)</a> </li> <li><a href="http://vixandmore.blogspot.com/2012/12/fiscal-cliff-continues-to-top-fear-poll.html">Fiscal Cliff Continues to Top Fear Poll</a> </li> <li><a href="http://vixandmore.blogspot.com/2012/12/fear-poll-respondents-focus-on-fiscal.html">Fear Poll Respondents Focus on Fiscal Cliff, Dismissive of European Financial Crisis</a> </li> <li><a href="http://vixandmore.blogspot.com/2012/12/fear-of-governments-and-politicians.html">Fear of Governments and Politicians Climb Rapidly as Euro Zone Worries Fade</a> </li> <li><a href="http://vixandmore.blogspot.com/2012/11/fiscal-cliff-concerns-top-fear-poll-but.htmlhttp:/vixandmore.blogspot.com/2012/11/fiscal-cliff-and-european-sovereign.htmlhttp:/vixandmore.blogspot.com/2012/11/fear-poll-fiscal-cliff-fears-spike.html">Fiscal Cliff Concerns Top Fear Poll, But Central Banks and Politicians Seen as Key Systemic Threats</a> </li> <li><a href="http://vixandmore.blogspot.com/2012/11/fiscal-cliff-and-european-sovereign.htmlhttp:/vixandmore.blogspot.com/2012/11/fear-poll-fiscal-cliff-fears-spike.html">Fiscal Cliff and European Sovereign Debt Concerns Recede, Earnings Worries Linger</a> </li> <li><a href="http://online.barrons.com/article/SB50001424052748704526104578118984076144580.html">Calm Down and Exploit Others’ Anxieties</a> <i>(Barron’s)</i> </li> <li><a href="http://vixandmore.blogspot.com/2012/11/fear-poll-fiscal-cliff-fears-spike.html">Fear Poll: Fiscal Cliff Fears Spike , Concerns About Excessive Central Bank Interventions Rise</a> </li> <li><a href="http://vixandmore.blogspot.com/2012/11/fiscal-cliff-worries-grow-as-election.html">Fiscal Cliff Worries Grow as Election Nears</a> </li> <li><a href="http://vixandmore.blogspot.com/2012/10/us-fiscal-cliff-fears-top-vix-and-more.html">U.S Fiscal Cliff Fears Top VIX Fear Poll Again</a> </li> <li><a href="http://vixandmore.blogspot.com/2012/10/us-fiscal-cliff-concerns-top-results-in.html">U.S. Fiscal Cliff Concerns Top Results in Inaugural VIX and More Fear Poll</a> </li> </ul> <p><b><i>Disclosure(s): </i></b><i>none</i></p> <img src="//feeds.feedburner.com/~r/VixAndMore/~4/ovAKtFL5gEA" height="1" width="1" alt=""/>Bill Lubyhttp://www.blogger.com/profile/01241003017364820134noreply@blogger.comhttp://vixandmore.blogspot.com/2014/10/fear-poll-fedqe-ebola-and-technicals.htmltag:blogger.com,1999:blog-897456774486153841.post-24524025660183784702014-10-13T10:37:00.001-07:002014-10-13T10:37:55.589-07:00Largest SPX Pullback of 2014 Hits 6.4%<p>Every time there is a pullback, it seems as if I receive multiple requests for an updated version of the table below. With the S&amp;P 500 index reeling and still trying to find a bottom, this looks like a good time to put the current pullback in the context of the 27 most significant peak-to-trough declines from new highs since the SPX bottomed in March 2009.</p> <p>Note that the current 6.4% decline from the September 19<sup>th</sup> high of 2019 is roughly average in terms of duration, but makes it the second largest pullback in percentage terms since 2012, just eclipsing the January-February 2014 pullback, when emerging markets (<a href="http://vixandmore.blogspot.com/search/label/EEM">EEM</a>) and Crimea were weighing heavily on the minds of investors.</p> <p>Keep in mind that as ugly has things have been in the SPX, the Russell 2000 small cap index (<a href="http://vixandmore.blogspot.com/search/label/RUT">RUT</a>) is down 13.8% since topping out in early July, while the NASDAQ composite index is down 8.5% since its mid-September top. Of course, some sectors have been hit even harder, with oil and gas exploration and production (<a href="http://vixandmore.blogspot.com/search/label/XOP">XOP</a>) down 33.3% from its 2014 high. Semiconductors (<a href="http://vixandmore.blogspot.com/search/label/SMH">SMH</a>) have declined 14.4% from their 2014 high, yet that high was established less than a month ago.</p> <p>There is never an easy answer to the question of whether this has been enough pain to warrant a bottom, but after the events of the past week, all sorts of extreme scenarios now seem much more plausible.</p> <p align="center"><a href="http://lh4.ggpht.com/-065rNd7ahVc/VDwN632Ed8I/AAAAAAAAJTs/KyoESey6mrE/s1600-h/SPXpullbackchartasof101314_zps5ff1c9f6%25255B1%25255D%25255B9%25255D.png"><img title="SPXpullbackchartasof101314_zps5ff1c9f6[1]" style="border-top: 0px; border-right: 0px; border-bottom: 0px; border-left: 0px; display: inline" border="0" alt="SPXpullbackchartasof101314_zps5ff1c9f6[1]" src="http://lh4.ggpht.com/-MjZ1iDYofPM/VDwN8c2attI/AAAAAAAAJT0/xF1Qzyf7PUo/SPXpullbackchartasof101314_zps5ff1c9f6%25255B1%25255D_thumb%25255B5%25255D.png?imgmax=800" width="496" height="780" /></a> </p> <p align="center"><i>[source(s): Yahoo, VIX and More]</i></p> <p>Related posts:</p> <ul> <li><a href="http://vixandmore.blogspot.com/2014/04/the-correction-as-seen-in-etp-landscape.html">The Correction As Seen in the VIX ETP Landscape</a></li> <li><a href="http://vixandmore.blogspot.com/2014/02/a-very-middling-pullback-so-far.htmlhttp:/vixandmore.blogspot.com/2013/06/all-about-pullback-from-spx-1687.html">A Very Middling Pullback, So Far</a></li> <li><a href="http://vixandmore.blogspot.com/2013/04/four-years-of-spx-pullbacks-in-one-plot.html">Four Years of SPX Pullbacks in One Plot</a></li> <li><a href="http://vixandmore.blogspot.com/2009/07/chart-of-week-spx-and-ndx.html">Chart of the Week: SPX and NDX</a></li> <li><a href="http://vixandmore.blogspot.com/2009/06/banks-large-cap-tech-and-leadership.html">Banks, Large Cap Tech and Leadership</a></li> <li><a href="http://vixandmore.blogspot.com/2009/04/chart-of-week-resurgent-nasdaq-100.html">Chart of the Week: The Resurgent NASDAQ-100</a></li> </ul> <p><b><i>Disclosure(s): </i></b><i>none</i></p> <img src="//feeds.feedburner.com/~r/VixAndMore/~4/GxDkm_OQ3Qk" height="1" width="1" alt=""/>Bill Lubyhttp://www.blogger.com/profile/01241003017364820134noreply@blogger.comhttp://vixandmore.blogspot.com/2014/10/largest-spx-pullback-of-2014-hits-64.htmltag:blogger.com,1999:blog-897456774486153841.post-54311954453504681122014-10-04T15:35:00.001-07:002014-10-04T15:35:32.223-07:00Song for My Father*<p>My father passed away this summer and in the intervening period I set aside my media hat. Before I formally return to the media space, I want to use this space to talk a little bit about my father.</p> <p>My father was an eccentric man and sometimes a complete enigma even to those who were closest to him. For instance, while we share the same name, he insists that I was named not after him but his uncle Bill, who was a <a href="http://www.baseball-reference.com/minors/player.cgi?id=luby--001wil">baseball player</a> in his earlier years and later became coach, attorney and a judge. My father followed his uncle into the legal field, with his own twist, carving out his own niche as a modern-day country lawyer and advisor.</p> <p>Outside of family and work matters, sailing, quantum physics and jazz were the three things my father was most passionate about. While part of the appeal of sailing was no doubt the escapist aspect of charting one’s one course – my father’s own moveable island – I have often thought that more than 90% of our father-son relationship and peer-to-peer relationship was formed while sailing together from Long Island Sound to Down East Maine. One particular trip that I often think about was a voyage from <a href="http://www.ledgelighthouse.org/images/700_Abandoned_Light.jpg">New London, Connecticut</a> to <a href="http://1.bp.blogspot.com/-9gBY_RVm2HM/T2vXipxFZrI/AAAAAAAAFcU/0Z1_dui-z48/s1600/beachwalk2.JPG">Cape Cod Bay</a> which was slowed dramatically by adverse currents and a lack of wind. Arriving very late one night at <a href="http://images.marinas.com/med_res_id/117659">Cuttyhunk Island</a>, we determined that the delays had almost entirely depleted our food supplies. After rummaging through the storage locker, my father declared that what remained were nine Saltine crackers and two bottles of wine. For dinner, he placed one bottle of wine on the table in front of me and pushed five of the nine crackers my way. I had begun that day as a 14-year-old boy, but when I woke up the next morning, I had no doubt that I was now a man. Several years later, we talked extensively about buying a <a href="http://www.beneteauusa.com/Sailboats">Beneteau</a> and sailing it back from <a href="http://www.saintgillescroixdevie.fr/var/ptic/storage/images/media/images/vue-aerienne-de-saint-gilles-croix-de-vie/84481-1-fre-FR/Vue-aerienne-de-Saint-Gilles-Croix-de-Vie.jpg">Saint-Gilles-Croix-de-Vie, France</a>, but this adventure never came to fruition.</p> <p>Ironically, while <a href="http://vixandmore.blogspot.com/2007/06/for-my-mother.html">my mother</a> was a teacher, journalist and quite adept at communicating, my father preferred to use language as a puzzle, where he would leave a minimal number of clues and see if the recipient of those clues could find his or her way to the finish line. Dubbed “The Great Communicator” by some of those who spent extended periods in his verbal labyrinth, when he wanted to my father could be an expert writer or orator, but when he preferred to get overly creative with language, he typically lost most of his audience in a hurry.</p> <p>As much as my father provided advice and counsel for countless family and friends, very little advice was aimed in my direction. One piece of advice I did hear over and over again was, “Keep your options open.” I have always attached a high degree of value to having options in life, but I often smile at the thought that a large part of what I do professionally is sell options to those who place a higher value on them than I do.&#160; On a somewhat related note, when I was a child, my father was keen on having me play chess with him. I received no leniency, coaching, hints or advice of any kind while losing literally thousands of matches. Eventually, I was able to learn enough to win consistently and in the process also learned how to figure things out for myself, the value of tenacity and many other life lessons. Only after his passing did I find an old yearbook and discover that he was the chess champion at his high school. Needless to say, without his hand, I would never have developed some of the skills that I enjoy today.</p> <p>Dad, wherever you are, I hope that the journey is smooth sailing and the wind is at your back.</p> <p><a href="http://lh4.ggpht.com/-KjssPWeTMuU/VDB2L1WgaVI/AAAAAAAAJTA/Yq-MbxUMpks/s1600-h/DadandDeb-Chatham2011-crop_zps8a590547%25255B1%25255D%25255B19%25255D.jpg"><img title="DadandDeb-Chatham2011-crop_zps8a590547[1]" style="border-top: 0px; border-right: 0px; border-bottom: 0px; float: none; margin-left: auto; border-left: 0px; display: block; margin-right: auto" border="0" alt="DadandDeb-Chatham2011-crop_zps8a590547[1]" src="http://lh5.ggpht.com/-FExlNU-8zQ0/VDB2Mo7apVI/AAAAAAAAJTI/vEsfgNFCXvs/DadandDeb-Chatham2011-crop_zps8a590547%25255B1%25255D_thumb%25255B17%25255D.jpg?imgmax=800" width="491" height="765" /></a></p> <p align="center"><i>[my father with my wife, Deborah, at the Cape Cod National Seashore, 2011]</i></p> <p>Related posts:</p> <ul> <li><a href="http://vixandmore.blogspot.com/2007/06/for-my-mother.html">For My Mother</a></li> </ul> <p align="left"><b><i>Disclosure(s): </i></b><i>none</i></p> <p align="left">*The title of this post also refers to one of my favorite jazzmen, Horace Silver, who wrote <a href="https://www.youtube.com/watch?v=CWeXOm49kE0&amp;list=RDNFjmWI-d6d4">Song for My Father</a></p> <img src="//feeds.feedburner.com/~r/VixAndMore/~4/jeaxFBOp9m0" height="1" width="1" alt=""/>Bill Lubyhttp://www.blogger.com/profile/01241003017364820134noreply@blogger.comhttp://vixandmore.blogspot.com/2014/10/song-for-my-father.htmltag:blogger.com,1999:blog-897456774486153841.post-26413035966329779362014-05-22T13:26:00.001-07:002014-05-22T13:26:46.342-07:00Low Volatility: How To Profit From a Quiet VIX (Guest Columnist at Barron’s)<p>Today I was once again a guest columnist at Barron’s, penning <a href="http://online.barrons.com/news/articles/SB50001424053111904554304579577934289682884">Low Volatility: How to Profit From a Quiet VIX</a> for the venerable Barron’s options column, <a href="http://online.barrons.com/public/search/results.html?HEADER_TEXT=The%20Striking%20Price%20Daily&amp;article-doc-type=%7bThe+Striking+Price+Daily%7d&amp;mod=BOL_article_full_more">The Striking Price</a>.&#160; While this is my thirteenth turn as guest columnist, much to my surprise this is the firsts time that “VIX” has appeared in the title.&#160; Since everyone seems to be talking about how low the VIX is, whether the VIX is broken, etc. I thought it would be an appropriate time to share some of my thoughts on the subject.</p> <p>In the Barron’s article I make the point that while <a href="http://vixandmore.blogspot.com/search/label/mean%20reversion">mean-reversion</a> trades when the <a href="http://vixandmore.blogspot.com/search/label/VIX%20spikes">VIX spikes</a> higher has been a viable strategy over the years, the mean reversion approach has not fared nearly as well when the VIX dives substantially below its long-term mean, which happens to be just a shade over 20.</p> <p>As the chart below (monthly bars of the VIX) shows, most significant VIX spikes tend to be short-lived, but the VIX can remain well below the 20 level for multiple years in a row. Just look at 1994 – 1996 and 2004 – 2007 and think about the long-term viability of buying VIX calls or putting on a similar long volatility position during a period like this one, armed with the knowledge that <i>eventually</i> the VIX will have to revert to its historical mean.</p> <p><a href="http://lh3.ggpht.com/-PlmYzYFH7Q0/U35dfPXwCZI/AAAAAAAAIx4/YrKJlRI23Jc/s1600-h/VIX%252520Macro%252520Cycles%2525201990-2014%25255B4%25255D.png"><img title="VIX Macro Cycles 1990-2014" style="border-top: 0px; border-right: 0px; border-bottom: 0px; border-left: 0px; display: inline" border="0" alt="VIX Macro Cycles 1990-2014" src="http://lh6.ggpht.com/-Wh-5qm-uEd4/U35dhBTXGKI/AAAAAAAAIyA/TV46LzV9SHI/VIX%252520Macro%252520Cycles%2525201990-2014_thumb%25255B2%25255D.png?imgmax=800" width="1083" height="503" /></a> </p> <p align="center"><i>[source(s): StockCharts.com]</i></p> <p>In fact, there have already been two instances (1990 – 1994 and 2002 -2007) in which the VIX declined steadily for a period of at least four years. With the most recent peak volatility in August 2011, it is not unreasonable to think about the possibility of volatility continuing to decline or at least tread water through at least August 2015.</p> <p>While the Barron’s article does not give my options trade idea a label, it is a ratio <a href="http://vixandmore.blogspot.com/search/label/risk%20reversal">risk reversal</a> that contemplates selling VIX June 14 puts and (perhaps) investing the proceeds in twice as many VIX June 17 calls.</p> <p>I encourage everyone to read the <a href="http://online.barrons.com/news/articles/SB50001424053111904554304579577934289682884">original article</a> at Barron’s, but for those who might not click through, I will include my closing paragraph below:</p> <blockquote> <p><i>“No matter what your market outlook, however, do not make the mistake of thinking that the VIX is no longer relevant, and be careful when it comes to equating a low VIX with complacency. The VIX has closed below 13 some 964 times – and almost all of these instances have been in the middle of a bull market.”</i></p> </blockquote> <p>Related posts:</p> <ul> <li><a href="http://vixandmore.blogspot.com/2014/01/was-vix-too-low-in-2013-no.html">Was the VIX too Low in 2013? No…</a></li> <li><a href="http://vixandmore.blogspot.com/2012/08/a-vix-risk-reversal.html">A VIX Risk Reversal</a></li> <li><a href="http://vixandmore.blogspot.com/2012/07/why-vix-puts-get-cheaper-in-more.html">Why VIX Puts Get Cheaper in More Distant Months</a></li> <li><a href="http://vixandmore.blogspot.com/2009/04/selling-vix-puts-with-help-of-put.html">Selling VIX Puts with the Help of a VIX Put Matrix</a></li> <li><a href="http://vixandmore.blogspot.com/2009/10/anchoring-and-vix-of-20.html">Anchoring and a VIX of 20</a></li> <li><a href="http://vixandmore.blogspot.com/2007/09/vix-macro-cycles.html">VIX Macro Cycles</a></li> <li><a href="http://vixandmore.blogspot.com/2007/12/was-2007-beginning-of-new-era-in.html">Was 2007 the Beginning of a New Era in Volatility?</a></li> <li><a href="http://vixandmore.blogspot.com/2011/10/shrinking-vix-macro-cycles.html">Shrinking VIX Macro Cycles</a></li> <li><a href="http://vixandmore.blogspot.com/2009/04/vix-high-or-low-it-depends.html">VIX High or Low? It Depends…</a></li> </ul> <p>A full list of my Barron’s contributions:</p> <ul> <li><a href="http://online.barrons.com/news/articles/SB50001424053111904554304579577934289682884">Low Volatility: How to Profit from a Quiet VIX</a> (May 22, 2014) </li> <li><a href="http://online.barrons.com/article/SB50001424053111903536004579467372137029220.html">Emerging Market Stocks: Have They Hit Bottom?</a> (March 28, 2014) </li> <li><a href="http://online.barrons.com/article/SB50001424052748704093404578609670858329206.html?mod=BOL_da_spd">How to Spot Risk Early</a> (July 16, 2013) </li> <li><a href="http://online.barrons.com/article/SB50001424052748703318404578430882101527030.html?mod=BOL_hps_highlight_mid">How to Insure Your Stock Portfolio</a> (April 18, 2013) </li> <li><a href="http://online.barrons.com/article/SB50001424052748703792204578217484255589840.html?mod=BOL_hps_highlight_bottom">The Case for Options Trading</a> (January 2, 2013) </li> <li><a href="http://online.barrons.com/article/SB50001424052748704526104578118984076144580.html">Calm Down and Exploit Others’ Anxieties</a> (November 14, 2012) </li> <li><a href="http://online.barrons.com/article/SB50001424053111904184504577518802209654274.html">How to Trade Options Around Volatile Events</a> (July 10, 2012) </li> <li><a href="http://online.barrons.com/article/SB50001424053111903935304577382010847832798.html?mod=BOL_hps_highlight_bottom">Be Greedy While Others Are Fearful</a> (May 3, 2012) </li> <li><a href="http://online.barrons.com/article/SB50001424052970204201404576077942647562616.html?mod=BOL_hps_dc">Ways to Turn Volatility into an Asset Class</a> (January 12, 2011) </li> <li><a href="http://online.barrons.com/article/SB50001424052970204743004575622694164710232.html">There’s Opportunity in Uncertainty</a> (November 18, 2010) </li> <li><a href="http://online.barrons.com/article/SB50001424052970204297404575493863568455090.html">Will Market Volatility Return to Crisis Levels?</a> (September 15, 2010) </li> <li><a href="http://online.barrons.com/article/SB127430948974994023.html">The Perils of Predicting Volatility</a> (May 20, 2010) </li> <li><a href="http://online.barrons.com/article/SB124648899704482887.html">Take a Longer View on Volatility</a> (July 2, 2009) </li> </ul> <p><b><i>Disclosure(s): </i></b><i>none</i></p> <img src="//feeds.feedburner.com/~r/VixAndMore/~4/LFd6g-TVHVI" height="1" width="1" alt=""/>Bill Lubyhttp://www.blogger.com/profile/01241003017364820134noreply@blogger.comhttp://vixandmore.blogspot.com/2014/05/low-volatility-how-to-profit-from-quiet.htmltag:blogger.com,1999:blog-897456774486153841.post-41640270304318320922014-04-15T11:58:00.001-07:002015-01-25T14:24:56.217-08:00The Correction As Seen in the ETP Landscape<p>Since stocks bottomed in March 2009, I have periodically been publishing an <a href="http://vixandmore.blogspot.com/2014/02/a-very-middling-pullback-so-far.htmlhttp:/vixandmore.blogspot.com/2013/06/all-about-pullback-from-spx-1687.html">SPX pullback table</a> and occasionally a <a href="http://vixandmore.blogspot.com/2013/04/four-years-of-spx-pullbacks-in-one-plot.html">plot of all those pullbacks and their duration</a>. The recent selloff in stocks, however, has been anything but an SPX pullback. I toyed with the idea of presenting comparable data for the NASDAQ Composite or NASDAQ-100 Index (<a href="http://vixandmore.blogspot.com/search/label/NDX">NDX</a>), but here again, the selling has been disproportionate in some areas of the NASDAQ universe, even though it has been hit harder than the SPX.</p> <p>This time around I have opted instead for a chart that shows the peak-to-trough drawdown across the equity ETP universe, focusing on sector groups that I believe are among the most important to watch.</p> <p><a href="http://lh4.ggpht.com/-9Ep62l-FC1w/U35eOacAFmI/AAAAAAAAIyI/1YAc7onT8sA/s1600-h/ETP%252520Landscape%2525202014%252520DDs%252520041514%25255B11%25255D.png"><img title="ETP Landscape 2014 DDs 041514" style="border-left-width: 0px; border-right-width: 0px; border-bottom-width: 0px; display: inline; border-top-width: 0px" border="0" alt="ETP Landscape 2014 DDs 041514" src="http://lh6.ggpht.com/-70lKlCNM4Mg/U35ePy3UenI/AAAAAAAAIyQ/4Mpd-dUlBDE/ETP%252520Landscape%2525202014%252520DDs%252520041514_thumb%25255B9%25255D.png?imgmax=800" width="1077" height="576" /></a> </p> <p align="center"><i>[source(s): Yahoo, VIX and More]</i></p> <p>The data above cover only 2014 and indicate the maximum drawdown since the 2014 peak. While many of these maximum drawdowns are from earlier today, there are quite a few instances in which the maximum drawdown was established earlier in the year.</p> <p>Note that while the NASDAQ gets most of the attention, it is the small caps (<a href="http://vixandmore.blogspot.com/search/label/IWM">IWM</a>) that have suffered the most among the major market index ETPs.</p> <p>Not surprisingly, biotechnology (<a href="http://vixandmore.blogspot.com/search/label/IBB">IBB</a>), social media (<a href="http://vixandmore.blogspot.com/search/label/SOCL">SOCL</a>) and Russia (<a href="http://vixandmore.blogspot.com/search/label/RSX">RSX</a>) have seen the largest declines, but among cyclicals, defensive stocks and European country ETPs, there is very little to choose from.</p> <p>Finally, just for fun I have added four alternative ETPs with an equity flavor (<a href="http://vixandmore.blogspot.com/search/label/SPLV">SPLV</a>, <a href="http://vixandmore.blogspot.com/search/label/PBP">PBP</a>, <a href="http://vixandmore.blogspot.com/search/label/CWB">CWB</a> and <a href="http://vixandmore.blogspot.com/search/label/PFF">PFF</a>) to show how low volatility, covered call, convertible bond and preferred stock ETPs have fared.</p> <p>Related posts:</p> <ul> <li><a href="http://vixandmore.blogspot.com/2014/02/a-very-middling-pullback-so-far.htmlhttp:/vixandmore.blogspot.com/2013/06/all-about-pullback-from-spx-1687.html">A Very Middling Pullback, So Far</a> </li> <li><a href="http://vixandmore.blogspot.com/2013/04/four-years-of-spx-pullbacks-in-one-plot.html">Four Years of SPX Pullbacks in One Plot</a> </li> <li><a href="http://vixandmore.blogspot.com/2009/07/chart-of-week-spx-and-ndx.html">Chart of the Week: SPX and NDX</a> </li> <li><a href="http://vixandmore.blogspot.com/2009/06/banks-large-cap-tech-and-leadership.html">Banks, Large Cap Tech and Leadership</a> </li> <li><a href="http://vixandmore.blogspot.com/2009/04/chart-of-week-resurgent-nasdaq-100.html">Chart of the Week: The Resurgent NASDAQ-100</a> </li> </ul> <p><b><i>Disclosure(s): </i></b><i>none</i></p> <img src="//feeds.feedburner.com/~r/VixAndMore/~4/lbDEJ9vzwhg" height="1" width="1" alt=""/>Bill Lubyhttp://www.blogger.com/profile/01241003017364820134noreply@blogger.comhttp://vixandmore.blogspot.com/2014/04/the-correction-as-seen-in-etp-landscape.htmltag:blogger.com,1999:blog-897456774486153841.post-66296838499125469262014-03-30T23:42:00.001-07:002014-03-30T23:47:34.741-07:00CBOE RMC 2014: A Retrospective<p>Earlier this month, I had the pleasure of attending the CBOE Risk Management Conference (RMC) in Bonita Springs, Florida. Now that the conference is over and the CBOE has <a href="http://www.cboermc.com/agenda/">posted</a> most of the presentations, I thought I would take a little time and offer a retrospective look at some of the content that caught my attention.</p> <p>Before I do that, I am compelled to tip my cap to <a href="http://www.cboeoptionshub.com/author/russell-rhoads/">Russell Rhoads</a>, whose indefatigable and prolific efforts were responsible for capturing many of the details of the conference. Russell’s posts and those of <a href="http://www.cboeoptionshub.com/author/matt-moran/">Matt Moran</a> made it possible for anyone to have a virtual front-row seat throughout the proceedings. Their efforts in conjunction with the RMC are archived at the <a href="http://www.cboeoptionshub.com/">CBOE Options Hub</a> with the <a href="http://www.cboeoptionshub.com/tag/cboermc/">CBOERMC tag</a>.</p> <p>From my vantage point, I thought it particularly interesting that the two keynote speakers, <a href="http://www.chicagobooth.edu/gls/speakers/?speaker=zonis">Martin Zonis</a> and <a href="http://www.northerntrust.com/pws/jsp/display2.jsp?TYPE=bio&amp;XML=contact/buscard/1216405007008_743.xml">Carl Tannenbaum</a>, had such divergent views about the potential risks and rewards in the U.S. financial markets in the coming years. Zonis placed most of his attention on political risk and foreign policy matters and declared that the markets were “underestimating volatility in future years.” While Tannenbaum expressed concern about banks in Europe as well as credit and real estate in China, he had a much more sanguine view of the future of the U.S. economy and financial markets.</p> <p>Among the other presentations, I was particularly interested to hear Maneesh Deshpande provide an overview of the players and strategies used in volatility products during the course of the evolution of the VIX product platform. Deshpande described the <a href="http://vixandmore.blogspot.com/search/label/VIX%20futures">VIX futures</a> as a mature market, with liquidity and supply having shifted from commercial to con-commercial traders. He also indicated that demand for VIX puts has stagnated, while new entrants are increasing the demand for VIX calls. All of this has influenced how the <a href="http://vixandmore.blogspot.com/search/label/VIX%20spikes">VIX spikes</a> and <a href="http://vixandmore.blogspot.com/search/label/mean%20reversion">mean reverts</a>, as well as how the VIX futures <a href="http://vixandmore.blogspot.com/search/label/term%20structure">term structure</a> has evolved.</p> <p>Another particularly interesting session involved Ed Tom and John-Mark Piampiano, who tackled the subject of the volatility of volatility, invoking the likes of <a href="http://vixandmore.blogspot.com/search/label/VVIX">VVIX</a> as well as the third and fourth derivatives of SPX implied volatility. At every conference at least one session gives you things to mull over long after the speakers are done and for me, this was the session that hit the high notes. Ed Tom’s presentation has not yet been posted, but he started his talk by decomposing VIX risk premium into realized volatility plus skew plus kurtosis and went on from there.</p> <p>Sheldon Natenberg and Trevor Mottl were tasked with the subject of evaluating the volatility surface: skew and term structure. Not surprisingly, they were up to the task, with Mottl focusing on the role of money and credit in shaping the volatility surface. He indicated that the increasing size of the Fed’s balance sheet has depressed volatility across the board over the course of the past few years and expects that as the Fed’s balance sheet normalizes, the change in non-financial debt will become the most important influence on equity market volatility going forward. Mottl attributed the steepness of the VIX futures term structure to the uncertainty related to the Fed’s ability to be successful with its quantitative easing program. He also traced fluctuations in the skew of volatility to expectations related to the Fed’s tapering plans.</p> <p>Among the other presentations I sat in on were:</p> <ul> <li>a panel on volatility as an asset class (the consensus that volatility is more of a tool and in order to be thought of as an asset class needs to harvestable, allocatable and easier to benchmark; a separate thread was critical of the costs associated with traditional approaches to tail hedges) </li> <li>a discussion of trading volatility across asset classes (included an interesting set of metrics and trade ideas) </li> <li>a wide-ranging session on the design and trading of VIX and other volatility derivatives, which had a detailed explanation of the VIX settlement process as well as a discussion of <a href="http://vixandmore.blogspot.com/search/label/VXST">VXST</a>, which is expected to gain much more momentum when options on the index become available on April 10 </li> </ul> <p>Finally, I had an opportunity to sit down with Angela Miles of <a href="http://www.cboeoptionshub.com/cboe-tv/">CBOE TV</a> to offer my thoughts on the second day of RMC: <br /></p> <span class="LimelightEmbeddedPlayer"> <p align="left"><script src="http://video.limelight.com/player/embed.js"></script><object type="application/x-shockwave-flash" id="limelight_player_898968" name="limelight_player_898968" class="LimelightEmbeddedPlayerFlash" width="480" height="321" data="http://video.limelight.com/player/loader.swf"><param name="movie" value="http://video.limelight.com/player/loader.swf" /><param name="wmode" value="window" /><param name="allowScriptAccess" value="always" /><param name="allowFullScreen" value="true" /><param name="flashVars" value="playerForm=Player&amp;mediaId=0423b06a5a54493a9c3d160d52c424b3" /></object><script>LimelightPlayerUtil.initEmbed('limelight_player_898968');</script></p> </span> <p>&#160;</p> <p>For those who may be interested, the <a href="http://www.cboermceurope.com/">3rd Annual CBOE RMC</a> will be held September 3-5, just south of Dublin, Ireland.&#160; Since all of my ancestors trace their roots back to Ireland, I can’t imagine a better place to hear about the latest thinking in volatility and ponder the miracle of Guinness draught at the same time.</p> <p>Related posts:</p> <ul> <li><a href="http://vixandmore.blogspot.com/2014/03/cboe-risk-management-conference-update.html">CBOE Risk Management Conference Update</a></li> <li><a href="http://vixandmore.blogspot.com/2013/03/some-thoughts-on-cboe-rmc.html">Some Thoughts on the CBOE RMC</a></li> <li><a href="http://vixandmore.blogspot.com/2013/02/best-vix-conference-of-year-try-cboe-rmc.html">Best VIX Conference of the Year? Try the CBOE RMC</a></li> <li><a href="http://vixandmore.blogspot.com/2012/02/upcoming-2012-cboe-risk-management.html">The Upcoming 2012 CBOE Risk Management Conference</a></li> <li><a href="http://vixandmore.blogspot.com/2011/03/vix-summit-aka-cboe-risk-management.html">The VIX Summit, a.k.a. the CBOE Risk Management Conference</a></li> <li><a href="http://vixandmore.blogspot.com/2013/09/best-vixvolatilityrisk-conference-of.html">Best VIX/Volatility/Risk Conference of 2013?</a></li> </ul> <p><b><i>Disclosure(s): </i></b><i>CBOE is an advertiser on VIX and More</i></p> <img src="//feeds.feedburner.com/~r/VixAndMore/~4/yAaUG2VFMXc" height="1" width="1" alt=""/>Bill Lubyhttp://www.blogger.com/profile/01241003017364820134noreply@blogger.comhttp://vixandmore.blogspot.com/2014/03/cboe-rmc-2014-retrospective.htmltag:blogger.com,1999:blog-897456774486153841.post-1357649785349691802014-03-29T23:33:00.001-07:002014-03-29T23:37:09.089-07:00The Turnaround in Emerging Markets and VXEEM<p>While I have a long way to go before I become the next <a href="http://sabr.org/bioproj/person/0cd53a93">Manny Mota</a>, yesterday I was delighted to be able to pinch hit for Steve Sears of Barron’s for the twelfth time, when I penned <a href="http://online.barrons.com/article/SB50001424053111903536004579467372137029220.html">Emerging Market Stocks: Have They Hit Bottom?</a> as a guest columnist for <a href="http://online.barrons.com/public/search/results.html?HEADER_TEXT=The%20Striking%20Price%20Daily&amp;article-doc-type=%7bThe+Striking+Price+Daily%7d&amp;mod=BOL_article_full_more">The Striking Price</a>.</p> <p>In the Barron’s article I talk about how rapidly increasing uncertainty and <a href="http://vixandmore.blogspot.com/search/label/risk">risk</a> in <a href="http://vixandmore.blogspot.com/search/label/emerging%20markets">emerging markets</a> during January was largely responsible for the 31.7% <a href="http://vixandmore.blogspot.com/search/label/VIX%20spikes">VIX spike</a> on January 24, but was nowhere near the levels of June 2013, at least as measured by the CBOE Emerging Markets Volatility Index (<a href="http://vixandmore.blogspot.com/search/label/VXEEM">VXEEM</a>).</p> <p>I also used the VXEEM:VIX ratio and some other data to support the idea that emerging markets have likely bottomed and are poised for a bounce. I concluded the Barron’s column with a couple of options trade ideas to take advantage of a reversal in emerging markets.</p> <p>When I wrote the article, on Tuesday, my position on emerging markets was very much a case of going out on limb. By Friday’s publication date, which includes Tuesday’s option pricing data, emerging markets had already experienced a significant bounce and my emerging markets thesis no doubt sounded much less provocative than it would have three days earlier.</p> <p align="center"><a href="http://i104.photobucket.com/albums/m163/bl82/EEMSPYEFA032814_zpsf84dc7ff.png"><img title="EEM SPY EFA 032814" style="border-top: 0px; border-right: 0px; border-bottom: 0px; border-left: 0px; display: inline" border="0" alt="EEM SPY EFA 032814" src="http://lh6.ggpht.com/-G-R_lLWCMk0/Uze7d1ZHYNI/AAAAAAAAIvI/r01mnL95jT8/EEM%252520SPY%252520EFA%252520032814%25255B27%25255D.png?imgmax=800" width="793" height="577" /></a> </p> <p align="center"><i>[source(s): StockCharts.com]</i></p> <p>In any event, I strongly believe that emerging markets (<a href="http://vixandmore.blogspot.com/search/label/EEM">EEM</a>) and VXEEM bear close watching going forward, as the Fed moves toward a new policy direction, emerging markets grapple with rising interest rates in the U.S. and the global economic growth story has many critical ripple effects across the full emerging markets landscape.</p> <p>Related posts:</p> <ul> <li><a href="http://vixandmore.blogspot.com/2013/08/watching-two-key-emerging-markets.html">Watching Two Emerging Markets Currencies</a></li> <li><a href="http://vixandmore.blogspot.com/2013/06/vxeem-as-measure-of-emerging-markets.html">VXEEM as a Measure of Emerging Markets Volatility and Risk</a></li> <li><a href="http://vixandmore.blogspot.com/2012/03/vxeem-vs-vix-indices-and-futures-in.html">VXEEM vs. VIX Indices and Futures in Today’s Selloff</a></li> <li><a href="http://vixandmore.blogspot.com/2013/07/charting-recent-decline-of-bric.html">Charting the Recent Decline of the BRIC Components</a></li> <li><a href="http://vixandmore.blogspot.com/2009/12/bric-bull.html">The BRIC Bull</a></li> <li><a href="http://vixandmore.blogspot.com/2009/04/russia-leading-bric-rally.html">Russia Leading the BRIC Rally</a></li> <li><a href="http://vixandmore.blogspot.com/2008/12/bric-update-china-leader-or-outlier.html">BRIC Update: China a Leader or an Outlier?</a></li> <li><a href="http://vixandmore.blogspot.com/2008/11/time-to-be-long-china.html">Time to Be Long China?</a></li> <li><a href="http://vixandmore.blogspot.com/2007/10/when-to-short-china.html">When to Short China?</a></li> <li><a href="http://vixandmore.blogspot.com/2008/10/implied-volatility-over-150-in-ewz.html">Implied Volatility Over 150 in EWZ, the Brazil ETF</a></li> <li><a href="http://vixandmore.blogspot.com/2008/02/brazil-rallies-while-china-struggles.html">Brazil Rallies While China Struggles</a></li> <li><a href="http://vixandmore.blogspot.com/2009/05/chart-of-week-emerging-markets.html">Chart of the Week: Emerging Markets</a></li> <li><a href="http://vixandmore.blogspot.com/2007/09/emerging-markets-engine.html">The Emerging Markets Engine</a></li> <li><a href="http://vixandmore.blogspot.com/2007/05/global-indicator-to-watch.html">A Global Indicator to Watch</a></li> </ul> <p>A full list of my Barron’s contributions:</p> <ul> <li><a href="http://online.barrons.com/article/SB50001424053111903536004579467372137029220.html">Emerging Market Stocks: Have They Hit Bottom?</a> (March 28, 2014) </li> <li><a href="http://online.barrons.com/article/SB50001424052748704093404578609670858329206.html?mod=BOL_da_spd">How to Spot Risk Early</a> (July 16, 2013) </li> <li><a href="http://online.barrons.com/article/SB50001424052748703318404578430882101527030.html?mod=BOL_hps_highlight_mid">How to Insure Your Stock Portfolio</a> (April 18, 2013) </li> <li><a href="http://online.barrons.com/article/SB50001424052748703792204578217484255589840.html?mod=BOL_hps_highlight_bottom">The Case for Options Trading</a> (January 2, 2013) </li> <li><a href="http://online.barrons.com/article/SB50001424052748704526104578118984076144580.html">Calm Down and Exploit Others’ Anxieties</a> (November 14, 2012) </li> <li><a href="http://online.barrons.com/article/SB50001424053111904184504577518802209654274.html">How to Trade Options Around Volatile Events</a> (July 10, 2012) </li> <li><a href="http://online.barrons.com/article/SB50001424053111903935304577382010847832798.html?mod=BOL_hps_highlight_bottom">Be Greedy While Others Are Fearful</a> (May 3, 2012) </li> <li><a href="http://online.barrons.com/article/SB50001424052970204201404576077942647562616.html?mod=BOL_hps_dc">Ways to Turn Volatility into an Asset Class</a> (January 12, 2011) </li> <li><a href="http://online.barrons.com/article/SB50001424052970204743004575622694164710232.html">There’s Opportunity in Uncertainty</a> (November 18, 2010) </li> <li><a href="http://online.barrons.com/article/SB50001424052970204297404575493863568455090.html">Will Market Volatility Return to Crisis Levels?</a> (September 15, 2010) </li> <li><a href="http://online.barrons.com/article/SB127430948974994023.html">The Perils of Predicting Volatility</a> (May 20, 2010) </li> <li><a href="http://online.barrons.com/article/SB124648899704482887.html">Take a Longer View on Volatility</a> (July 2, 2009) </li> </ul> <p><b><i>Disclosure(s): </i></b><i>CBOE is an advertiser on VIX and More</i></p> <img src="//feeds.feedburner.com/~r/VixAndMore/~4/4tB-2FDvjtI" height="1" width="1" alt=""/>Bill Lubyhttp://www.blogger.com/profile/01241003017364820134noreply@blogger.comhttp://vixandmore.blogspot.com/2014/03/the-turnaround-in-emerging-markets-and.htmltag:blogger.com,1999:blog-897456774486153841.post-71942459702384912922014-03-18T21:39:00.001-07:002014-03-18T21:39:33.231-07:00CBOE Risk Management Conference Update<p>Today was the first full day of the CBOE Risk Management Conference and between the presentations, sidebar conversations and opportunities to meet and greet, I have to say that things hit full stride very quickly.</p> <p>Today CBOE CEO Ed Tilly <a href="http://ir.cboe.com/releasedetail.cfm?ReleaseID=833592">announced</a> that the CBOE will roll out nearly 24 hours of trading, five days per week in <a href="http://vixandmore.blogspot.com/search/label/VIX%20futures">VIX futures</a> beginning on Sunday, June 22. This announcement follows another important <a href="http://ir.cboe.com/releasedetail.cfm?releaseid=832160">announcement</a> last week that options on <a href="http://vixandmore.blogspot.com/search/label/VXST">VXST</a> (the CBOE Short-Term Volatility Index) will commence on April 10. Clearly, things continue to move forward on the volatility product front and at the end of the year, I suspect we will lock back on these two developments as critical milestones in the volatility space.</p> <p>Today I had the opportunity to listen to Marvin Zonis give a keynote address on “New Insights into Geopolitical Risk: Examining Geopolitical Risk Hot Spots and the Implications for Trading Strategies and Risk Management.” For anyone wondering about what it might take to drive the VIX higher over the course of the next few years, Zonis had a laundry list of grave concerns (<a href="http://vixandmore.blogspot.com/search/label/Ukraine">Ukraine</a>, <a href="http://vixandmore.blogspot.com/search/label/Japan">Japan</a>/China, Korean Peninsula, <a href="http://vixandmore.blogspot.com/search/label/Pakistan">Pakistan</a>, <a href="http://vixandmore.blogspot.com/search/label/Iran">Iran</a>/<a href="http://vixandmore.blogspot.com/search/label/Israel">Israel</a>/nuclear weapons, <a href="http://vixandmore.blogspot.com/search/label/Egypt">Egypt</a>/<a href="http://vixandmore.blogspot.com/search/label/Syria">Syria</a>/<a href="http://vixandmore.blogspot.com/search/label/TUR">Turkey</a>, <a href="http://vixandmore.blogspot.com/search/label/China">China</a>, political stagnation, etc.) and summarized the situation by saying, “We are in the age of <i>major</i>, <i>major</i> political risk.”</p> <p>Another featured speaker was Maneesh Deshpande, who talked extensively about the evolution of the demand for volatility products as well as the evolution of the supply for volatility products. Maneesh had a number of interesting observations about new players and new strategies in the volatility space. He also expressed concern about the crowded VIX short trade and the potential for the next crisis that does not mean-revert quickly to lead to a sharp second <a href="http://vixandmore.blogspot.com/search/label/VIX%20spikes">VIX spike</a> as shorts scramble to cover their positions.</p> <p>Also of interest was a two-part presentation with Dominic Salvino discussing VXST and other volatility index products (he expects interest in VXST futures will pick up dramatically after the options are launched in less than a month) as well as a detailed description of the VIX settlement process (<a href="http://vixandmore.blogspot.com/search/label/VIX%20SOQ">VIX SOQ</a>) by Bill Speth of the CBOE</p> <p>Other sessions I attended today included: </p> <ul> <li>a panel on volatility as an asset class that produced considerable debate on the proper answer to that question as well as a good deal of criticism of tail risk strategies</li> <li>two speakers on trading volatility across asset classes that shared details on the methodology they use to generate trade ideas as well as quite a few cross-asset class pairs trades</li> </ul> <p>Last but not least, I had the opportunity to meet quite a few people who have been regular readers of <i>VIX and More</i> over the years, many of whom nudged me to ramp up my posting frequency – which I certainly intend to do in 2014, starting this week.</p> <p>Related posts:</p> <ul> <li><a href="http://online.barrons.com/article/SB50001424053111903935304577382010847832798.html">Be Greedy When Others Are Fearful</a> <i>(Barron’s)</i></li> <li><a href="http://vixandmore.blogspot.com/2013/07/charting-recent-decline-of-bric.html">Charting the Recent Decline of the BRIC Components</a></li> <li><a href="http://vixandmore.blogspot.com/2013/06/using-dxj-to-monitor-developments-in.html">Using DXJ to Monitor Developments in Japanese Equities, Currency and Risk</a></li> <li><a href="http://vixandmore.blogspot.com/2013/06/vxeem-as-measure-of-emerging-markets.html">VXEEM as a Measure of Emerging Markets Volatility and Risk</a></li> <li><a href="http://vixandmore.blogspot.com/search/label/Egypt">Chart of the Week: EGPT and Collateral Damage</a></li> <li><a href="http://vixandmore.blogspot.com/2014/03/vix-march-futures-and-options.html">VIX March Futures and Options Expiration on Monday, Not Tuesday</a></li> <li><a href="http://vixandmore.blogspot.com/2011/08/convergence-of-vix-and-vix-futures-at.html"></a><a href="http://vixandmore.blogspot.com/2013/10/the-new-vxst-and-vxstvix-ratio.html">The New VXST and VXST:VIX Ratio</a></li> </ul> <p><b><i>Disclosure(s): </i></b><i>CBOE is an advertiser on VIX and More</i></p> <img src="//feeds.feedburner.com/~r/VixAndMore/~4/dZtO55hrjAg" height="1" width="1" alt=""/>Bill Lubyhttp://www.blogger.com/profile/01241003017364820134noreply@blogger.comhttp://vixandmore.blogspot.com/2014/03/cboe-risk-management-conference-update.htmltag:blogger.com,1999:blog-897456774486153841.post-81497281032641947262014-03-14T10:48:00.001-07:002014-03-14T10:48:00.039-07:00VIX March Futures and Options Expiration on Tuesday, Not Wednesday<p>Just a quick reminder for those who may not be aware of it that the <a href="http://vixandmore.blogspot.com/search/label/VIX%20futures">VIX futures</a> and <a href="http://vixandmore.blogspot.com/search/label/VIX%20options">options</a> expiration for March falls on<em> next Tuesday</em>, March 18<sup>th</sup>, not the typical Wednesday. This means that the VIX special opening quotation (<a href="http://vixandmore.blogspot.com/search/label/VIX%20SOQ">SOQ</a>) used to determine the March settlement price will be at the open on Tuesday and also the last trading day for the VIX March futures and options will be on Monday. With the speed at which things are developing in Ukraine and elsewhere, these 24 hours could turn out to be significant. </p> <p>For those who are interested in a link to the VIX options expiration calendar, the CBOE maintains a 2014 options expiration calendar <a href="http://www.cboe.com/TradTool/2014_CBOEwebsite.pdf">here</a>, with the VIX expiration highlighted in a solid dark orange box. Note that I have a link to the CBOE options expiration calendar on the blog at the bottom of my VIX, Sentiment &amp; Options section.</p> <p>To review how the VIX expiration dates are determined, the VIX futures and options expire 30 days before the SPX monthly options expiration in the following month. These SPX options expirations are almost always on a Friday, therefore the VIX expiration is almost always on the Wednesday four weeks and two days prior to the SPX expiration. The complication factor for the VIX March 2014 expiration cycle is that on Friday, April 18, the CBOE is closed due to the Good Friday holiday, which pushes up the April SPX expiration to Thursday, April 17, with the result that the VIX March expiration is pushed up one day as well.</p> <p>Last but not least, the VIX SOQ probably deserves a separate post in order to explain some of its unique characteristics, but it is worth noting that the VIX SOQ is not the price at which the VIX opens, but rather another separate calculation that takes place at the open.</p> <p>Related posts:</p> <ul> <li><a href="http://vixandmore.blogspot.com/2011/08/convergence-of-vix-and-vix-futures-at.html">The Convergence of VIX and VIX Futures at Expiration</a></li> <li><a href="http://vixandmore.blogspot.com/2009/01/vix-january-options-as-short-term.html">VIX January Options as Short-Term Portfolio Protection</a></li> <li><a href="http://vixandmore.blogspot.com/2013/08/pricing-of-vix-august-and-september.html">Pricing of VIX August and September Calls</a></li> <li><a href="http://vixandmore.blogspot.com/2013/03/another-record-in-vix-call-volume.html">Another Record Day in VIX Call Volume</a></li> <li><a href="http://vixandmore.blogspot.com/2009/06/selling-vix-puts-pre-expiration.html">Selling VIX Puts Pre-Expiration</a></li> <li><a href="http://vixandmore.blogspot.com/2009/02/vix-butterfly-play.html">A VIX Butterfly Play</a></li> <li><a href="http://vixandmore.blogspot.com/2009/02/follow-up-to-vix-butterfly-play.html">Follow-Up to “A VIX Butterfly Play”</a></li> <li><a href="http://vixandmore.blogspot.com/2008/11/lots-of-premium-left-on-last-day-of.html">Lots of Premium Left on Last Day of Trading in VIX November Options</a></li> <li><a href="http://vixandmore.blogspot.com/2008/10/vix-soq-at-6304.html">SPX Options Carpet Bomb Pushes VIX SOQ to 63.04 (!)</a></li> </ul> <p><b><i></i></b></p> <p><b><i>Disclosure(s): </i></b><i>CBOE is an advertiser on VIX and More</i></p> <img src="//feeds.feedburner.com/~r/VixAndMore/~4/60FjXMBRcoo" height="1" width="1" alt=""/>Bill Lubyhttp://www.blogger.com/profile/01241003017364820134noreply@blogger.comhttp://vixandmore.blogspot.com/2014/03/vix-march-futures-and-options.htmltag:blogger.com,1999:blog-897456774486153841.post-89625798376518414592014-03-11T00:26:00.001-07:002014-03-11T00:28:20.998-07:00CBOE Risk Management Conference, the VIX and Volatility Summit, Begins in One Week<p>The CBOE calls it the <a href="http://www.cboermc.com/">CBOE Risk Management Conference</a> and I like to think of it as “The VIX Summit,” but by any name I am convinced that the 30<sup>th</sup> annual CBOE RMC (yes, it is even nine years older than the VIX) is the top conference of the year for anyone with an interest in the VIX, volatility and more broadly in the subject of risk management.</p> <p>Kicking off one week from today, on March 17<sup>th</sup> in Bonita Springs, Florida, the CBOE RMC is the best place I can think of to interact with the top thinkers and practitioners in the volatility space. The <a href="http://www.cboermc.com/speakers/">speakers</a> and the <a href="http://www.cboermc.com/agenda/">agenda</a> are both top notch and as always, an abundance of fascinating ideas and information will flow freely outside of the formal presentations. Some of the sessions that sound particularly interesting to my ear include:</p> <ul> <li>The Shifting Landscape of Volatility Products: Who is Doing What and Why, and What Should You Do About It?</li> <li>Panel on Volatility as an Asset Class: What Options- and Volatility-Related Strategies are Institutional Investors Employing and Why? </li> <li>Trading Volatility Across Asset Classes</li> <li>Volatility of Volatility</li> <li>The Volatility Surface:&#160; Skew and Term-Structure</li> <li>Listed Derivative Product Design and Trading</li> </ul> <p>I encourage anyone with an interest in volatility to attend as this is an excellent place to find ideas to ruminate on and to master the art of volatility cross-pollination. After all, it is still a relatively small (but growing) group of aficionados that live and breathe volatility. Where else, for instance, can you find a bunch of like-minded souls who are already plotting how to implement <a href="http://vixandmore.blogspot.com/search/label/VXST">VXST</a> options strategies when these products have not even been launched?</p> <p>Speaking of like-minded souls, if you have a moment, I encourage you to flag me down and say hello.</p> <p>For those who are unable to attend, I will do my best to pass along some of the highlights from the conference.</p> <p>Finally, for those who might be interested in a similar event on European soil, planning for the 3<sup>rd</sup> Annual CBOE RME-Europe is ongoing and at this juncture the odds favor a location that will appeal to those who are fans of links golf courses.</p> <p>Related posts:</p> <ul> <li><a href="http://vixandmore.blogspot.com/2013/03/some-thoughts-on-cboe-rmc.html">Some Thoughts on the CBOE RMC</a></li> <li><a href="http://vixandmore.blogspot.com/2013/02/best-vix-conference-of-year-try-cboe-rmc.html">Best VIX Conference of the Year? Try the CBOE RMC</a></li> <li><a href="http://vixandmore.blogspot.com/2012/02/upcoming-2012-cboe-risk-management.html">The Upcoming 2012 CBOE Risk Management Conference</a></li> <li><a href="http://vixandmore.blogspot.com/2011/03/vix-summit-aka-cboe-risk-management.html">The VIX Summit, a.k.a. the CBOE Risk Management Conference</a></li> <li><a href="http://vixandmore.blogspot.com/2013/09/best-vixvolatilityrisk-conference-of.html">Best VIX/Volatility/Risk Conference of 2013?</a></li> </ul> <p><b><i></i></b></p> <p><b><i>Disclosure(s): </i></b><i>CBOE is an advertiser on VIX and More; VIX and More is a sponsor of the CBOE Risk Management Conference</i></p> <img src="//feeds.feedburner.com/~r/VixAndMore/~4/4r45I5mD5sY" height="1" width="1" alt=""/>Bill Lubyhttp://www.blogger.com/profile/01241003017364820134noreply@blogger.comhttp://vixandmore.blogspot.com/2014/03/cboe-risk-management-conference-vix-and.htmltag:blogger.com,1999:blog-897456774486153841.post-63328272233438992912014-02-04T09:52:00.001-08:002014-02-04T09:56:49.829-08:00A Very Middling Pullback, So Far<p>Nary a selloff goes by these days without at least a handful of readers asking for an update of the SPX pullback table I have used to chronicle the pullbacks in the S&amp;P 500 index since stocks bottomed in March 2009.</p> <p>The table below captures the 24 most significant peak-to-trough declines from new highs during the course of what is now an almost five-year bull move:</p> <p align="center"><img src="http://i104.photobucket.com/albums/m163/bl82/SPXpullbacktable020314_zps20507397.png" /></p> <p align="center"><i>[source(s): Yahoo, VIX and More]</i></p> <p>Note that the current peak-to-trough decline of 6.0% puts the pullback in the middle (#11 of 24) of those pullbacks in terms of magnitude, though it is slightly lower than the 6.9% average (mean) pullback during the period, due to large selloffs in 2010 and 2011 that skew the average well above the median.</p> <p>While the recent decline seems sharp, it actually progressed in two stages: a sideways to slightly down move for the latter half of January; and a sharper decline at the end of January and the beginning of February. If one were to plot the magnitude of the current pullback against the duration of the peak-to-trough move, it would like exactly on the trend line which can be found on the plot in <a href="http://vixandmore.blogspot.com/2013/06/all-about-pullback-from-spx-1687.html">All About the Pullback from 1687</a>. In other words, the current pullback, should it stop at SPX 1739, is very middling in almost all respects.</p> <p>That being said, a mean pullback of 6.9% would take the SPX down to 1723 and a pullback matching the 21.6% decline from 2011 would take the SPX all the way back to 1451 – a level not seen since early January 2013.</p> <p>Right now the SPX is at 1757 and has about a 1% buffer over yesterday’s low. While <a href="http://vixandmore.blogspot.com/search/label/emerging%20markets">emerging markets</a> are bouncing back nicely today, anything can happen following the release of Friday’s <a href="http://vixandmore.blogspot.com/search/label/nonfarm%20payrolls">nonfarm payroll</a> data.</p> <p>Related posts:</p> <ul> <li><a href="http://vixandmore.blogspot.com/2013/06/all-about-pullback-from-spx-1687.html">All About the Pullback from 1687</a></li> </ul> <p><b><i>Disclosure(s): </i></b><i>none</i></p> <img src="//feeds.feedburner.com/~r/VixAndMore/~4/lh4Or1-vgaw" height="1" width="1" alt=""/>Bill Lubyhttp://www.blogger.com/profile/01241003017364820134noreply@blogger.comhttp://vixandmore.blogspot.com/2014/02/a-very-middling-pullback-so-far.htmltag:blogger.com,1999:blog-897456774486153841.post-20185272937627043542014-01-31T11:50:00.001-08:002014-01-31T11:50:02.763-08:00VXX and VXZ Now Five Years Old!<p>In the midst of all the <a href="http://vixandmore.blogspot.com/search/label/emerging%20markets">emerging markets</a> turmoil, I wanted to take a moment to acknowledge the fifth birthday of the two pioneering <a href="http://vixandmore.blogspot.com/search/label/VIX%20ETN">VIX ETPs</a> : <a href="http://vixandmore.blogspot.com/search/label/VXX">VXX</a> and <a href="http://vixandmore.blogspot.com/search/label/VXZ">VXZ</a>. Launched five weeks before stocks hit their 2008-09 financial crisis bottom, both VXX and VXZ have struggled against a tide of falling volatility over the course of the past five years and have also been battered by persistent <a href="http://vixandmore.blogspot.com/search/label/contango">contango</a> in the <a href="http://vixandmore.blogspot.com/search/label/VIX%20futures">VIX futures</a>, which has created additional head winds in the form of negative <a href="http://vixandmore.blogspot.com/search/label/roll%20yield">roll yield</a>.</p> <p>The table below captures the grim history of these two products, looking at product lifecycle years from January 30<sup>th</sup> to January 30<sup>th</sup>:</p> <p align="center"><img src="http://i104.photobucket.com/albums/m163/bl82/VXXandVXA-5yrs013014_zps21afe79a.png" /></p> <p align="center"><i>[source(s): CBOE, Yahoo, VIX and More]</i></p> <p>Note that even though each of the five years have been losing years for both products, there have been periods in which these products have been extremely strong performers. One of these periods was from July to October 2011 when VXX nearly tripled (maximum gain of 198%) and VXZ rallied some 66%. I mention this because both have performed well in January, with VXX up 13.0% as I type this and VXZ with gains of 2.2% for the year.</p> <p>While I am not going out on a limb and predicting a renaissance for these two VIX ETPs, they are two of the most important and liquid VIX ETPs on the market and can be attractive hedges or speculative trades when the markets go through a period of selling and/or there are concerns about a potential crisis.</p> <p>I have been writing about these even before they were launched and will continue to offer my thoughts on them going forward.</p> <p>Related posts:</p> <ul> <li><a href="http://vixandmore.blogspot.com/2014/01/performance-of-vix-etps-in-2013.html">Performance of VIX ETPs in 2013</a></li> <li><a href="http://vixandmore.blogspot.com/2013/01/vix-etp-performance-in-2012.html">VIX ETP Performance in 2012</a></li> <li><a href="http://vixandmore.blogspot.com/2011/12/vix-exchange-traded-products-year-in.html">VIX Exchange-Traded Products: The Year in Review, 2011</a></li> <li><a href="http://vixandmore.blogspot.com/2013/10/performance-of-vix-etps-during-recent.html">Performance of VIX ETPs During the Recent Debt Ceiling Crisis</a></li> <li><a href="http://vixandmore.blogspot.com/2012/03/vxx-vxz-xiv-and-ziv-during-eleven.html">VXX, VXZ, XIV and ZIV During Eleven Months of a Sideways VIX</a></li> <li><a href="http://vixandmore.blogspot.com/2012/01/monthly-comparison-of-vxx-and-vxz.html">A Monthly Comparison of VXX and VXZ</a></li> <li><a href="http://vixandmore.blogspot.com/2012/11/xiv-and-ziv-are-huge-success-stories.html">XIV and ZIV Are Huge Success Stories Two Years After Launching</a></li> <li><a href="http://vixandmore.blogspot.com/2013/12/vix-futures-term-structure-in-2013.html">VIX Futures Term Structure in 2013 Looks a Lot Like 2012</a></li> <li><a href="http://vixandmore.blogspot.com/2013/01/vxx-and-vxz-celebrate-fourth-birthday.html">VXX and VXZ Celebrate Fourth Birthday</a></li> <li><a href="http://vixandmore.blogspot.com/2012/01/vxx-celebrates-third-birthday.html">VXX Celebrates Third Birthday</a></li> <li><a href="http://vixandmore.blogspot.com/2011/01/chart-of-week-vxx-celebrates-2nd.html">Chart of the Week: VXX Celebrates 2<sup>nd</sup> Birthday</a></li> <li><a href="http://vixandmore.blogspot.com/2009/05/vxx-calculations-vix-futures-and-time.html">VXX Calculations, VIX Futures and Time Decay</a></li> <li><a href="http://vixandmore.blogspot.com/2009/10/why-vxx-is-not-good-short-term-or-long.html">Why VXX Is Not a Good Short-Term or Long-Term Play</a></li> <li><a href="http://vixandmore.blogspot.com/2010/10/vxx-monthly-performance.html">VXX Monthly Performance</a></li> <li><a href="http://vixandmore.blogspot.com/2010/01/chart-of-week-vxx-celebrates-one-year.html">Chart of the Week: VXX Celebrates One Year of Futility</a></li> <li><a href="http://vixandmore.blogspot.com/2010/05/chart-of-week-vxx-vs-vix.html">Chart of the Week: VXX vs. VIX</a></li> <li><a href="http://vixandmore.blogspot.com/2011/01/managing-risk-with-short-vxx-position.html">Managing Risk with a Short VXX Position</a></li> <li><a href="http://vixandmore.blogspot.com/2011/01/charting-assets-of-volatility-based.html">Charting the Assets of Volatility-Based ETPs</a></li> </ul> <p><b><i>Disclosure(s): </i></b><i>short VIX and VXX at time of writing</i></p> <p><i>[source(s): CBOE, Yahoo, VIX and More]</i></p> <img src="//feeds.feedburner.com/~r/VixAndMore/~4/3MsDeUnUzBg" height="1" width="1" alt=""/>Bill Lubyhttp://www.blogger.com/profile/01241003017364820134noreply@blogger.comhttp://vixandmore.blogspot.com/2014/01/vxx-and-vxz-now-five-years-old.htmltag:blogger.com,1999:blog-897456774486153841.post-28933238077932412892014-01-26T22:45:00.001-08:002015-01-25T14:22:52.659-08:00Performance of VIX ETPs in 2013<p>A number of readers have asked me to recap the performance of the <a href="http://vixandmore.blogspot.com/search/label/VIX%20ETN">VIX ETPs</a> in 2013 according to the leverage/maturity grid I have been publishing for several years.</p> <p>The graphic below should look familiar to long-term readers and measures the performance of all VIX and volatility ETPs for 2013, including dividends. (Two exceptions are <a href="http://vixandmore.blogspot.com/search/label/TRSK">TRSK</a> and <a href="http://vixandmore.blogspot.com/search/label/SPXH">SPXH</a>, which have data going back to June 24, 2013 and as such, the closing price on that date is treated as the opening price for 2013.)&#160; This time around I am going to refrain from most editorial comments, yet point out that the data bears a very strong resemblance to what I presented in <a href="http://vixandmore.blogspot.com/2013/10/performance-of-vix-etps-during-recent.html">VIX ETP Performance in 2012</a>.&#160; It is also worth noting that just because there were similar numbers in 2012 and 2013, one should not expect these patterns to repeat on a regular basis. In <a href="http://vixandmore.blogspot.com/2013/10/performance-of-vix-etps-during-recent.html">Performance of VIX ETPs During the Recent Debt Ceiling Crisis</a>, for instance, I present a very different set of data that students of volatility should also pay close attention to.</p> <p align="center"><img src="http://i104.photobucket.com/albums/m163/bl82/VIXETPPerformancefor2013_zpsd29222fe.png" /></p> <p align="center"><i>[source(s): CBOE, Yahoo, VIX and More]</i></p> <p>For a more detailed discussion of the performance drivers of various VIX ETPs and for additional performance data and commentary, the links below should provide an excellent jumping off point.</p> <p>Related posts:</p> <ul> <li><a href="http://vixandmore.blogspot.com/2013/10/performance-of-vix-etps-during-recent.html">Performance of VIX ETPs During the Recent Debt Ceiling Crisis</a> </li> <li><a href="http://vixandmore.blogspot.com/2013/01/vix-etp-performance-in-2012.html">VIX ETP Performance in 2012</a> </li> <li><a href="http://vixandmore.blogspot.com/2013/08/expanded-performance-of-volatility.html">Expanded Performance of Volatility-Hedged and Related ETPs</a> </li> <li><a href="http://vixandmore.blogspot.com/2012/06/performance-of-volatility-hedged-etps.html">Performance of Volatility-Hedged ETPs</a> </li> <li><a href="http://vixandmore.blogspot.com/2012/04/performance-of-vix-etp-hedges-in.html">Performance of VIX ETP Hedges in Current Selloff</a> </li> <li><a href="http://vixandmore.blogspot.com/2012/01/comparing-splv-and-vqt.html">Comparing SPLV and VQT</a> </li> <li><a href="http://vixandmore.blogspot.com/2012/01/three-new-risk-control-etfs-from.html">Three New Risk Control ETFs from Direxion</a> </li> <li><a href="http://vixandmore.blogspot.com/2012/02/will-tvix-go-to-zero.html">Will TVIX Go To Zero?</a> </li> <li><a href="http://vixandmore.blogspot.com/2012/02/four-key-drivers-of-price-of-tvix.html">Four Key Drivers of the Price of TVIX</a> </li> <li><a href="http://vixandmore.blogspot.com/2012/02/all-about-uvxy.html">All About UVXY</a> </li> <li><a href="http://vixandmore.blogspot.com/2010/10/case-for-vqt.html">The Case for VQT</a> </li> <li><a href="http://vixandmore.blogspot.com/2009/10/why-vxx-is-not-good-short-term-or-long.html">Why VXX Is Not a Good Short-Term or Long-Term Play</a> </li> <li><a href="http://vixandmore.blogspot.com/2009/05/vxx-calculations-vix-futures-and-time.html">VXX Calculations, VIX Futures and Time Decay</a> </li> <li><a href="http://vixandmore.blogspot.com/2012/10/the-2012-vix-futures-term-structure-as.html">2012 VIX Futures Term Structure as an Outlier</a> </li> <li><a href="http://vixandmore.blogspot.com/2012/05/cheating-with-partial-hedges.html">Cheating with Partial Hedges</a> </li> <li><a href="http://online.barrons.com/article/SB50001424052748703318404578430882101527030.html?mod=BOL_hps_highlight_mid">How to Insure Your Stock Portfolio</a> <i>(Barron’s)</i> </li> </ul> <p><b><i>Disclosure(s): </i></b><i>none</i></p> <img src="//feeds.feedburner.com/~r/VixAndMore/~4/mRhSVWE_7FQ" height="1" width="1" alt=""/>Bill Lubyhttp://www.blogger.com/profile/01241003017364820134noreply@blogger.comhttp://vixandmore.blogspot.com/2014/01/performance-of-vix-etps-in-2013.htmltag:blogger.com,1999:blog-897456774486153841.post-20878658514208310572014-01-26T18:58:00.001-08:002014-01-26T19:44:17.178-08:00The Year in VIX and Volatility (2013)<p>This is the sixth year in a row I have offered a retrospective look at the year in VIX and Volatility, which is my attempt to cram the highlights of the year in volatility onto one graphic with a manageable amount of annotations.</p> <p>In terms of equity volatility and specifically the VIX, 2013 was the story of a persistent bull market in stocks and very little in the way of implied or realized volatility, at least by historical standards. In fact, the VIX’s high water mark of 21.91 was the second lowest annual high point since 1995, eclipsed only by the Greenspan liquidity flood in 2005. Similarly, the average VIX in 2013 was just 14.23, considerably lower than the long-term average, which is a shade over 20. The year only saw two days in which the SPX was up 2% or more and another two days in which the SPX was down at least 2%, the fewest number of such days since 2006.</p> <p>Even though the numbers may not be impressive, there were still some significant events during the course of the year that were able to provoke substantial anxiety and <a href="http://vixandmore.blogspot.com/search/label/fear">fear</a>, at least for the short-term. The year began with the <a href="http://vixandmore.blogspot.com/search/label/fiscal%20cliff">Fiscal Cliff</a> drama coming to an end and saw fear in the euro zone heat up after the <a href="http://vixandmore.blogspot.com/search/label/Italy">Italian</a> elections ended with a parliamentary deadlock and Cypriot banks triggered a joint EU/IMF bailout of Cyprus. The Boston Marathon bombings provided a jolt of terrorist fear in April and fears about <a href="http://vixandmore.blogspot.com/search/label/Japan">Japan</a> the future of Abenomics created huge volatility in the <a href="http://vixandmore.blogspot.com/search/label/Yen">yen</a>, with ripple effects felt across currency markets and in many related financial markets during May and June.</p> <p>In the U.S., the Fed tapering scenarios dominated the investment landscape during the second half of the year and the <a href="http://vixandmore.blogspot.com/search/label/debt%20ceiling">debt ceiling</a> crisis, government shutdown and entrenched bipartisan bickering cast many doubts about the potential for some huge self-inflicted wounds.</p> <p>In the end, the SPX set 44 new all-time closing highs in 2013 and the VIX ended the year almost 24% below where it finished in 2012, though the Fiscal Cliff was responsible for most of that gap.</p> <p align="center"><img src="http://i104.photobucket.com/albums/m163/bl82/TheYearinVIXandVolatility2013_zps3eafd66e.png" /></p> <p align="center"><i>[source(s): StockCharts.com. VIX and More]</i></p> <p>So far 2014 looks more interesting from a volatility perspective, but the year is young and the volatility story is always one of surprises in the form of swans with dark gray plumage.</p> <p>Related posts:</p> <ul> <li><a href="http://vixandmore.blogspot.com/2013/01/the-year-in-vix-and-volatility-2012.html">The Year in VIX and Volatility (2012)</a></li> <li><a href="http://vixandmore.blogspot.com/2012/01/year-in-vix-and-volatility-2011.html">The Year in VIX and Volatility (2011)</a></li> <li><a href="http://vixandmore.blogspot.com/2011/01/year-in-vix-and-volatility-2010.htmlhttp:/vixandmore.blogspot.com/2011/01/chart-of-week-year-in-economic-data.html">The Year in VIX and Volatility, 2010</a></li> <li><a href="http://vixandmore.blogspot.com/2010/01/chart-of-week-vix-and-volatility-in.html">Chart of the Week: The VIX and Volatility in 2009</a></li> <li><a href="http://vixandmore.blogspot.com/2009/01/year-in-global-volatility.html">The Year in Global Volatility (2008)</a></li> </ul> <p><b><i>Disclosure(s): </i></b><i>none</i></p> <img src="//feeds.feedburner.com/~r/VixAndMore/~4/u6nFRasP0jg" height="1" width="1" alt=""/>Bill Lubyhttp://www.blogger.com/profile/01241003017364820134noreply@blogger.comhttp://vixandmore.blogspot.com/2014/01/the-year-in-vix-and-volatility-2013.htmltag:blogger.com,1999:blog-897456774486153841.post-50527969107771748602014-01-26T18:22:00.001-08:002014-01-26T18:22:01.351-08:00Top Posts of 2013<p>Every year I tabulate the most-read posts in this space as a way to monitor the issues that are resonating with readers and also to see how these issues evolve over time. These most-read posts also serve as easily accessible repositories of high-quality material for the benefit of new readers and long-term readers alike.</p> <p>The top themes from 2013 echo some top themes that resonated with readers from previous years, including continued interest in <a href="http://vixandmore.blogspot.com/search/label/VIX%20spikes">VIX spikes</a> and SPX pullbacks, as well as the <a href="http://vixandmore.blogspot.com/search/label/VIX%20ETN">VIX ETPs</a>, low volatility ETPs, <a href="http://vixandmore.blogspot.com/search/label/FOMC">the Fed</a>, interest rates and various global flash points, such as <a href="http://vixandmore.blogspot.com/search/label/emerging%20markets">emerging markets</a>.</p> <p>The posts below represent those that have been read by the highest number of unique readers during 2013. Farther down there are links to similar lists going back to 2008, along with several other “best of” type posts that I have flagged for <a href="http://vixandmore.blogspot.com/search/label/archival">archival</a> purposes. </p> <p>For the record, each year I also attach the <a href="http://vixandmore.blogspot.com/search/label/hall%20of%20famehttp:/vixandmore.blogspot.com/2007/01/week-in-vix-january-7-2007-introduction.html">hall of fame</a> label to a handful of posts that I believe have particularly compelling and/or original content, regardless of readership. I find it interesting that ten posts from 2013 made it into the hall of fame – a record for any single year. Part of the reason for this is that while my total number of posts for 2013 was low, I favored quality and more in-depth analysis than pithy commentary, most of which I have migrated to my Twitter handle feed, <a href="https://twitter.com/VIXandMore">@VIXandMore</a></p> <p>The most-read posts on VIX and More in 2013 were:</p> <ul> <li><a href="http://vixandmore.blogspot.com/2013/03/the-low-volatility-story-in-pictures.html">The Low Volatility Story in Pictures</a></li> <li><a href="http://vixandmore.blogspot.com/2013/01/vix-etp-performance-in-2012.html">VIX ETP Performance in 2012</a></li> <li><a href="http://vixandmore.blogspot.com/2013/04/four-years-of-spx-pullbacks-in-one-plot.html">Four Years of SPX Pullbacks in One Plot</a></li> <li><a href="http://vixandmore.blogspot.com/2013/10/a-history-of-vix-during-recent-debt.html">A History of VIX During Recent Debt Ceiling and Sequestration Battles</a></li> <li><a href="http://vixandmore.blogspot.com/2013/02/all-time-vix-spike-11-and-treasure.html">All-Time VIX Spike #11 (and a treasure trove of VIX spike data)</a></li> <li><a href="http://vixandmore.blogspot.com/2013/06/the-vix-and-pre-fomc-post-fomc-trades.html">The VIX and the Pre-FOMC + Post-FOMC Trades</a></li> <li><a href="http://vixandmore.blogspot.com/2013/06/the-currency-carry-trade-dbv-and-risk.html">The Currency Carry Trade, DBV and Risk</a></li> <li><a href="http://vixandmore.blogspot.com/2013/06/vix-futures-margin-requirements-to.html">VIX Futures Margin Requirements to Increase After Today’s Close</a></li> <li><a href="http://vixandmore.blogspot.com/2013/03/lowest-vix-close-since-day-before.html">Lowest VIX Close Since Day Before Biggest VIX Spike Ever</a></li> <li><a href="http://vixandmore.blogspot.com/2013/09/revisiting-vixvxv-ratio.html">Revisiting the VIX:VXV Ratio</a><u></u></li> <li><a href="http://vixandmore.blogspot.com/2013/01/the-inverted-percentile-vix.html">The Inverted Percentile VIX</a></li> <li><a href="http://vixandmore.blogspot.com/2013/03/the-vix-interpolation-and-roll.html">The VIX, Interpolation and the Roll</a></li> <li><a href="http://vixandmore.blogspot.com/2013/02/record-vix-options-volume-and-large.html">Record VIX Options Volume and Large Purchases of VIX Calls</a></li> <li><a href="http://vixandmore.blogspot.com/2013/02/updated-spx-pullback-summary-table-for.html">Updated SPX Pullback Summary Table for SPX 1485</a></li> <li><a href="http://vixandmore.blogspot.com/2013/06/isee-equities-only-index-prints.html">ISEE Equities Only Index Prints Something Not Seen Since March 6, 2009</a></li> <li><a href="http://vixandmore.blogspot.com/2013/07/charting-recent-decline-of-bric.html">Charting the Recent Decline of BRIC Components</a></li> <li><a href="http://vixandmore.blogspot.com/2013/05/the-fed-qe-economy-and-goldilocks-20.html">The Fed, QE, the Economy and Goldilocks 2.0</a></li> <li><a href="http://vixandmore.blogspot.com/2013/02/beyond-splv-expanding-universe-of-low.html">Beyond SPLV: The Expanding Universe of Low Volatility ETPs</a></li> <li><a href="http://vixandmore.blogspot.com/2013/06/vix-and-spx-during-1994-interest-rate.html">VIX and SPX During 1994 Interest Rate Hike Cycle</a></li> <li><a href="http://vixandmore.blogspot.com/2013/01/the-year-in-vix-and-volatility-2012.html">The Year in VIX and Volatility 2012</a></li> <li><a href="http://vixandmore.blogspot.com/2013/02/the-options-and-volatility-etps.html">The Options and Volatility ETPs Landscape</a></li> <li><a href="http://vixandmore.blogspot.com/2013/06/vxeem-as-measure-of-emerging-markets.html">VXEEM as a Measure of Emerging Markets Volatility and Risk</a></li> <li><a href="http://vixandmore.blogspot.com/2013/08/spx-pullback-table-fall-from-1709.html">SPX Pullback Table: The Fall From 1709</a></li> <li><a href="http://vixandmore.blogspot.com/2013/10/event-risk-event-theta-and-next-week.html">Event Risk, Theta and Next Week</a></li> <li><a href="http://vixandmore.blogspot.com/2013/10/the-new-vxst-and-vxstvix-ratio.html">The New VXST and the VXST:VIX Ratio</a></li> </ul> <p>Related posts:<u></u></p> <ul> <li><a href="http://vixandmore.blogspot.com/2012/12/top-posts-of-2012.html">Top Posts of 2012</a></li> <li><a href="http://vixandmore.blogspot.com/2011/12/top-posts-of-2011.html">Top Posts of 2011</a></li> <li><a href="http://vixandmore.blogspot.com/2010/12/top-posts-of-2010.html">Top Posts of 2010</a></li> <li><a href="http://vixandmore.blogspot.com/2009/12/top-posts-of-2009.html">Top Posts of 2009</a></li> <li><a href="http://vixandmore.blogspot.com/2008/12/top-posts-of-2008.html">Top Posts of 2008</a></li> <li><a href="http://vixandmore.blogspot.com/2008/01/one-year-blogiversary.html">One Year Blogiversary!</a> (includes top 25 posts of 2007) </li> <li><a href="http://vixandmore.blogspot.com/2009/06/1000th-post.html">The 1000<sup>th</sup> Post</a></li> <li><a href="http://vixandmore.blogspot.com/2012/01/five-years-of-vix-and-more.html">Five Years of VIX and More</a></li> <li><a href="http://vixandmore.blogspot.com/2009/10/post-of-month-informal-history-of-vix.html">The Post of the Month: An Informal History of VIX and More</a></li> <li><a href="http://vixandmore.blogspot.com/search/label/hall%20of%20fame">The VIX and More Hall of Fame</a></li> </ul> <p><b><i>Disclosure(s): </i></b><i>none</i></p> <img src="//feeds.feedburner.com/~r/VixAndMore/~4/_eQxwLUKZ3k" height="1" width="1" alt=""/>Bill Lubyhttp://www.blogger.com/profile/01241003017364820134noreply@blogger.comhttp://vixandmore.blogspot.com/2014/01/top-posts-of-2013.htmltag:blogger.com,1999:blog-897456774486153841.post-71366466318467524432014-01-02T00:25:00.001-08:002014-01-02T00:25:37.371-08:00Was the VIX Too Low in 2013? No…<p>There was a time when investors would generally fret about the VIX being “too high” and the resulting possibility that there was some sort of unseen threat to the financial markets that was not showing up on their radar. In the last few years, the situation has reversed and now I find investors expressing more concern about a low VIX more often than a high VIX. Yes, there are some (many, actually) who start to get anxious and fearful when the markets are not reflecting as much anxiety and <a href="http://vixandmore.blogspot.com/search/label/fear">fear</a> as they think they should. For those who still think about the battle scars from <a href="http://vixandmore.blogspot.com/search/label/2008">2008</a>, this phenomenon seems to be a recurring issue.&#160; (See my posts on <a href="http://vixandmore.blogspot.com/search/label/disaster%20imprinting">disaster imprinting</a> for more information on this.)</p> <p>So…was the VIX too low in 2013? In order to answer this question, I am updating a chart I last presented in October 2012 in <a href="http://vixandmore.blogspot.com/2012/10/ratio-of-vix-to-realized-volatility.html">Ratio of VIX to Realized Volatility Higher than Any Year Since 1996</a>.</p> <p>As the chart shows, both the (mean) VIX and 10-day <a href="http://vixandmore.blogspot.com/search/label/historical%20volatility">historical volatility</a> (HV) of the S&amp;P 500 index were are relatively low levels during 2013. More importantly, the VIX maintained an average premium of 34% to the 10-day HV of the SPX during the year, which is right in line with historical norms going back to 1990 of a premium of about 35%.</p> <p align="center"><img src="http://i104.photobucket.com/albums/m163/bl82/VIXandSPXHVbyyear010114_zpsc6448474.png" /></p> <p align="center"><i>[source(s): CBOE, Yahoo]</i></p> <p>While I have used data provided by the CBOE going back to 1990 in calculating historical norms, I think it is worth noting that from 1990-1996, the VIX typically had a much higher premium relative to historical volatility in the SPX than it has in more recent years, so whereas the long-term VIX premium to HV stands at about 35%, the post-1996 average premium is closer to 26%. As a result, if you really need to drive home the point that the VIX was “too low” in 2013, you can always trot out the post-1996 data, but otherwise consider the VIX to be just about exactly where it should have been – at least in relation to historical volatility – during the past year.</p> <p>Last but not least, the chart also illustrates that while the VIX and SPX HV do have a tendency to trend over the course of several years, the ratio of the two has a much more random movement and is therefore much more difficult to predict for 2014.</p> <p>Related posts:</p> <ul> <li><a href="http://vixandmore.blogspot.com/2012/12/volatility-during-crises.html">Volatility During Crises</a></li> <li><a href="http://vixandmore.blogspot.com/2012/10/ratio-of-vix-to-realized-volatility.html">Ratio of VIX to Realized Volatility Higher than Any Year Since 1996</a></li> <li><a href="http://vixandmore.blogspot.com/2012/04/vix-premium-to-spx-historical.html">VIX Premium to Historical Volatility at Record High in Q1</a></li> <li><a href="http://vixandmore.blogspot.com/2011/01/s-500-index-20-day-historical.html">S&amp;P 500 Index 20-Day Historical Volatility Hits 39-Year Low</a></li> <li><a href="http://vixandmore.blogspot.com/2010/09/vix-and-historical-volatility-settling.html">VIX and Historical Volatility Settling Back into Normal Range</a></li> <li><a href="http://vixandmore.blogspot.com/2009/11/chart-of-week-no-more-free-lunch-for.html">Chart of the Week: No More Free Lunch for Volatility Sellers?</a></li> <li><a href="http://vixandmore.blogspot.com/2009/08/gap-between-vix-and-realized-volatility.html">The Gap Between the VIX and Realized Volatility</a></li> <li><a href="http://vixandmore.blogspot.com/2009/12/what-is-historical-volatility.html">What Is Historical Volatility?</a></li> <li><a href="http://vixandmore.blogspot.com/2010/05/rule-of-16-and-vix-of-40.html">Rule of 16 and VIX of 40</a></li> <li><a href="http://vixandmore.blogspot.com/2009/11/availability-bias-and-disaster.html">Availability Bias and Disaster Imprinting</a></li> <li><a href="http://vixandmore.blogspot.com/2009/11/vix-data-to-support-availability-bias.html">VIX Data to Support Availability Bias and Disaster Imprinting Hypothesis</a></li> <li><a href="http://vixandmore.blogspot.com/2009/12/calculating-centered-and-non-centered.html">Calculating Centered and Non-Centered Historical Volatility</a></li> <li><a href="http://vixandmore.blogspot.com/2009/02/thinking-about-volatility-first-in.html">Thinking About Volatility (First in a Series)</a></li> </ul> <p><b><i>Disclosure(s): </i></b><i>CBOE is an advertiser on VIX and More</i></p> <img src="//feeds.feedburner.com/~r/VixAndMore/~4/9mh-o2msxIo" height="1" width="1" alt=""/>Bill Lubyhttp://www.blogger.com/profile/01241003017364820134noreply@blogger.comhttp://vixandmore.blogspot.com/2014/01/was-vix-too-low-in-2013-no.htmltag:blogger.com,1999:blog-897456774486153841.post-52815255089463103892013-12-31T22:08:00.001-08:002013-12-31T22:08:46.561-08:00VIX Futures Term Structure in 2013 Looks a Lot Like 2012<p>This was a very quiet year for the VIX, with the volatility index posting its second narrowest range for the year since 1995, trailing only 2005, when the Greenspan liquidity flood overwhelmed even the mere thought of a meaningful correction.</p> <p>The graphic below shows the average (mean) normalized <a href="http://vixandmore.blogspot.com/search/label/term%20structure">term structure</a> for each year since the <a href="http://vixandmore.blogspot.com/search/label/VIX%20futures">VIX futures</a> were launched, back in 2004. In normalizing the data, I have set the average front month VIX futures contract to 100 and have expressed the averages of the second through seven months as multiples of the front month.</p> <p align="center"><img src="http://i104.photobucket.com/albums/m163/bl82/VIXfuturestermstructurebyyear123113_zps1f6fe271.png" /></p> <p align="center"><i>[source(s): CBOE Futures Exchange (CFE)]</i></p> <p>Note that although the VIX futures were launched in 2004, consecutive VIX futures contracts for the first six months were not available until October 2006, hence the dotted lines for these years to reflect the erratic nature of the data. Interestingly, the lower VIX years of 2005 and 2006 did not produce the steep term structure that we saw in 2012 and saw again in 2013. Last year I <a href="http://vixandmore.blogspot.com/2012/10/the-2012-vix-futures-term-structure-as.html">described</a> the 2012 VIX futures term structure as a statistical outlier, but now that 2013 data is in the books, it may be more appropriate to think about how the markets might have changed in the last two years, with potential causes that range from the <a href="http://vixandmore.blogspot.com/search/label/VIX%20ETN">VIX ETPs</a>, more interest in trading volatility products, the rise of <a href="http://vixandmore.blogspot.com/search/label/weeklys">weekly options</a> and other developments.</p> <p>In the next few days I will devote a series of posts to analyzing some VIX, volatility and related data for 2013, then as 2014 unfolds I will offer some thoughts on how some of these markets are changing and evolving.</p> <p>At the very least, I expect to ramp up my posting substantially in 2014, now that I have my investment management business up and running and find it easier to wear multiple hats at the same time.</p> <p>Happy New Year!</p> <p>Related posts:</p> <ul> <li><a href="http://vixandmore.blogspot.com/2012/10/the-2012-vix-futures-term-structure-as.html">The 2012 VIX Futures Term Structure as an Outlier</a></li> <li><a href="http://vixandmore.blogspot.com/2013/11/the-evolution-of-holiday-effect-in-vix.html">The Evolution of the Holiday Effect in VIX Futures</a></li> <li><a href="http://vixandmore.blogspot.com/2013/09/revisiting-vixvxv-ratio.html">Revisiting the VIX:VXV Ratio</a></li> <li><a href="http://vixandmore.blogspot.com/2012/07/crazy-vixvxv-ratio-chart.html">Crazy VIX:VXV Ratio Chart</a></li> <li><a href="http://vixandmore.blogspot.com/2013/10/the-new-vxst-and-vxstvix-ratio.html">The New VXST and the VXST:VIX Ratio</a></li> <li><a href="http://vixandmore.blogspot.com/2012/10/violent-disagreement-across-vix-futures.html">Violent Disagreement Across VIX Futures</a></li> <li><a href="http://vixandmore.blogspot.com/2012/06/tracking-fall-in-vix-futures.html">Tracking the Fall in VIX Futures</a></li> <li><a href="http://vixandmore.blogspot.com/2012/03/third-steepest-first-second-vix-futures.html">Third Steepest First-Second Month VIX Futures Contango Ever</a></li> <li><a href="http://vixandmore.blogspot.com/2011/11/vix-futures-tale-of-two-backwardations.html">VIX Futures: A Tale of Two Backwardations</a></li> <li><a href="http://vixandmore.blogspot.com/2011/11/new-vix-backwardation-record.html">New VIX Backwardation Record</a></li> <li><a href="http://vixandmore.blogspot.com/2011/08/vix-backwardation-commentary.html">VIX Backwardation Commentary</a></li> <li><a href="http://vixandmore.blogspot.com/2011/08/vix-term-structure-evolution-over-last.html">VIX Term Structure Evolution Over Last Ten Days</a></li> <li><a href="http://vixandmore.blogspot.com/2010/10/capitulation-in-back-month-vix-futures.html">Capitulation in Back Month VIX Futures</a></li> <li><a href="http://vixandmore.blogspot.com/2010/09/vix-futures-what-wereare-they-thinking.html">VIX Futures: What Were/Are They Thinking?</a></li> <li><a href="http://vixandmore.blogspot.com/2008/12/vix-term-structure-chances-since.html">VIX Term Structure Changes Since November 20th</a></li> <li><a href="http://vixandmore.blogspot.com/2012/02/monitoring-vix-futures-and-their-impact.html">Monitoring VIX Futures and Their Impact on VIX ETPs</a></li> <li><a href="http://vixandmore.blogspot.com/2009/05/vxx-calculations-vix-futures-and-time.html">VXX Calculations, VIX Futures and Time Decay</a></li> </ul> <p><b><i>Disclosure(s): </i></b><i>none</i></p> <img src="//feeds.feedburner.com/~r/VixAndMore/~4/SuyuXrGUJ3U" height="1" width="1" alt=""/>Bill Lubyhttp://www.blogger.com/profile/01241003017364820134noreply@blogger.comhttp://vixandmore.blogspot.com/2013/12/vix-futures-term-structure-in-2013.htmltag:blogger.com,1999:blog-897456774486153841.post-7892084480450478692013-11-03T22:46:00.001-08:002014-01-26T18:06:49.238-08:00The Evolution of the Holiday Effect in VIX Futures<p><i>[The following originally appeared in the November 2012 edition of Expiring Monthly: The Option Traders Journal. I thought the contents might be timely in light of the upcoming holiday season.]</i></p> <p><i></i></p> <p>With fewer trading days and a historical record that favors an uptick in stocks and a downtick in volatility, the end of the year never fails to present an intriguing set of trading opportunities.</p> <p>One phenomenon related to the above is something I have labeled the “<a href="http://vixandmore.blogspot.com/search/label/Holiday%20Effect">holiday effect</a>,” which is the tendency of the CBOE Volatility Index (VIX) December futures to trade at a discount to the midpoint of the VIX November and January futures.</p> <p>This article provides some historical analysis of the holiday effect and analyzes how the holiday effect has been manifest and evolved over the course of the past few years. <br /></p> <p><b>Background and Context on the Holiday Effect on the VIX Index</b></p> <p>Part of the explanation for the holiday effect is embedded in the historical record. For instance, in eight of the last twenty years, the VIX index has made its annual low during the month of December. In fact, the VIX has demonstrated a marked tendency to decline steadily for the first 17 trading days of the month, as shown below in Figure 1, which uses normalized VIX December data to compare all VIX values for each trading day dating back to 1990. Not surprisingly, those 17 trading days neatly coincide with the typical number of December trading days in advance of the Christmas holiday.</p> <p align="center"><img src="http://i104.photobucket.com/albums/m163/bl82/Figure3-TheCompositeDecemberVIXIndex1990-2011source-CBOEVIXandMore_zps8e1c8fe2.png" /></p> <p align="center"><i>{Figure 1: The Composite December VIX Index, 1990-2011 (source: CBOE Futures Exchange, VIX and More)} </i></p> <p>Readers should also note that, on average, the steepest decline in the VIX usually occurs from the middle of the month right up to the Christmas holiday. <br /></p> <p><b>The December VIX Futures Angle</b></p> <p>Most VIX traders are aware of the tendency of implied volatility in general and the VIX in particular to decline in December. As a result, since the launch of VIX futures in 2004, there has usually been a noticeable dip in the <a href="http://vixandmore.blogspot.com/search/label/VIX%20futures">VIX futures</a> <a href="http://vixandmore.blogspot.com/search/label/term%20structure">term structure</a> curve for the month of December. Figure 2 below is a snapshot of the VIX futures curve from September 12, 2012. Here I have added a dotted black line to show what a linear interpolation of the December VIX futures would look like, with the green line showing the 0.50 point differential between the actual December VIX futures settlement value of 20.40 on that date and the 20.90 interpolated value, which is derived from the November and January VIX futures contracts. (Apart from the distortions present in the December VIX futures, a linear interpolation utilizing the first and third month VIX futures normally provides an excellent estimate of the value of the second month VIX futures.)</p> <p align="center"><img src="http://i104.photobucket.com/albums/m163/bl82/Figure2-VIXFuturesCurvefromSeptember122012ShowingHolidayEffectsourceCBOEFuturesExchangeVIXandMore_zps295c76c9.png" /></p> <p align="center"><i>{Figure 2: VIX Futures Curve from September 12, 2012 Showing Holiday Effect (source: CBOE Futures Exchange, VIX and More)} </i></p> <p>Looking at the full record of historical data, the mean holiday effect for all days in which the November, December and January futures traded is 1.87%, which means that the December VIX futures have been, on average, 1.87% lower than the value predicted by a linear interpolation of the November and January VIX futures. Further analysis reveals that on 91% of all trading days, the December VIX futures are lower than their November-January interpolated value. The holiday effect, therefore, is persistent and substantial. <br /></p> <p><b>The History of the Holiday Effect in the December VIX Futures</b></p> <p>Determining whether the holiday effect is statistically significant is a more daunting task, as there are only six holiday seasons from which one can derive meaningful VIX futures data. Figure 3 shows the monthly average VIX December futures (solid blue line) as well as the midpoint of the November and the January VIX futures (dotted red line) for each month since the VIX futures consecutive contracts were launched in October 2006. Here the green bars represent the magnitude of the holiday effect expressed in percentage terms, with the sign inverted (i.e., a +2% holiday effect means that the VIX December futures would be 2% <i>below</i> the interpolated value derived from November and January futures.)</p> <p align="center"><img src="http://i104.photobucket.com/albums/m163/bl82/Figure1-VIXDecemberFuturesHolidayEffect2006-2012source-CBOEFuturesExchangeVIXandMore_zps9826443e.png" /></p> <p align="center"><i>{Figure 3: VIX December Futures Holiday Effect, 2006-2012 (source: CBOE Futures Exchange, VIX and More)} <br /></i></p> <p><b>Conclusions</b></p> <p>With limited data from which to draw conclusions, it is tempting to eyeball the data and look for emerging patterns which may repeat in the future. Clearly one pattern is that an elevated or rising VIX appears to coincide with a larger magnitude holiday effect, whereas a depressed or falling VIX is consistent with a smaller holiday effect. The data is much less compelling when one tries to determine whether the time remaining until the holiday season has an influence on the magnitude of the holiday effect. While one might expect the holiday effect to become magnified later in the season, the evidence to support this hypothesis is scant at this stage.</p> <p>To sum up, investors have readily accepted that a lower VIX is warranted for December and the downward blip in December for the VIX futures term structure reflects this thinking. As far as whether this <a href="http://vixandmore.blogspot.com/search/label/seasonality">seasonal anomaly</a> is tradable, there is still a limited amount of data – not to mention some highly unusual volatility years – from which to develop and back test a robust VIX futures strategy designed to capture the holiday effect.</p> <p>In terms of trading the holiday effect for the remainder of the year, the coming holiday season is also complicated by matters such as the fiscal cliff deadline and various euro zone milestones that are set for early 2013. In fact, there may not be a reasonable equivalent since the Y2K fears in late 1999 that turned out to be a volatility non-event when the calendar flipped to 2000.</p> <p>While the opportunities to capitalize on the 2012 holiday effect may be difficult to pinpoint and fleeting, all investors should be attuned to seasonal volatility cycles as 2013 unfolds and volatility expectations ebb and flow with the news cycle as well as the calendar.</p> <p>Related posts:</p> <ul> <li><a href="http://vixandmore.blogspot.com/2011/12/december-is-cruelest-monthfor-vix.html">December Is the Cruelest Month…For the VIX</a> </li> <li><a href="http://vixandmore.blogspot.com/2010/12/vix-and-second-half-of-december.html">VIX and the Week Before Christmas</a> </li> <li><a href="http://vixandmore.blogspot.com/2010/12/chart-of-week-historical-volatility.html">Chart of the Week: Historical Volatility Plummets in Seasonal Swoon</a> </li> <li><a href="http://vixandmore.blogspot.com/2008/12/vix-holiday-crush.html">VIX Holiday Crush</a> </li> </ul> <p>Other articles republished from Expiring Monthly:</p> <ul> <li><a href="http://vixandmore.blogspot.com/2012/12/volatility-during-crises.html">Volatility During Crises</a> </li> <li><a href="http://vixandmore.blogspot.com/2012/05/cheating-with-partial-hedges.html">Cheating with Partial Hedges</a> </li> <li><a href="http://vixandmore.blogspot.com/2012/01/vix-vxx-minotaur-trade.html">The VIX-VXX Minotaur Trade</a> </li> <li><a href="http://vixandmore.blogspot.com/2010/09/education-of-trader.html">The Education of a Trader</a> </li> </ul> <p><b><i>Disclosure(s): </i></b><i>none</i></p> <img src="//feeds.feedburner.com/~r/VixAndMore/~4/nhP7PDgc8hc" height="1" width="1" alt=""/>Bill Lubyhttp://www.blogger.com/profile/01241003017364820134noreply@blogger.comhttp://vixandmore.blogspot.com/2013/11/the-evolution-of-holiday-effect-in-vix.htmltag:blogger.com,1999:blog-897456774486153841.post-74515394671289168272013-10-31T11:30:00.001-07:002013-10-31T11:30:35.808-07:00Halloween Monsters<p>In the spirit of the day and lacking the resources and imagination to do something as elaborate as the <a href="http://www.youtube.com/watch?v=CtgYY7dhTyE">Guillermo del Toro couch intro</a> for the 2013 Treehouse of Horrors episode of The Simpsons (definitely worth a click through) I have elected instead to construct a portfolio of what I am calling the <a href="http://vixandmore.blogspot.com/search/label/Halloween%20Monsters">Halloween Monsters</a> – a group of ten stocks that have been absolutely killing it this year, leading the markets higher.</p> <p>The list includes the following familiar momentum names:</p> <ul> <li>Tesla Motors (<a href="http://vixandmore.blogspot.com/search/label/TSLA">TSLA</a>)</li> <li>Netflix (<a href="http://vixandmore.blogspot.com/search/label/NFLX">NFLX</a>)</li> <li>Facebook (<a href="http://vixandmore.blogspot.com/search/label/FB">FB</a>)</li> <li>LinkedIn (<a href="http://vixandmore.blogspot.com/search/label/LNKD">LNKD</a>)</li> <li>First Solar (<a href="http://vixandmore.blogspot.com/search/label/FSLR">FSLR</a>)</li> <li>priceline.com (<a href="http://vixandmore.blogspot.com/search/label/PCLN">PCLN</a>)</li> <li>Baidu (<a href="http://vixandmore.blogspot.com/search/label/BIDU">BIDU</a>)</li> <li>Amazon.com (<a href="http://vixandmore.blogspot.com/search/label/AMZN">AMZN</a>)</li> <li>Gilead Sciences (<a href="http://vixandmore.blogspot.com/search/label/GILD">GILD</a>)</li> <li>Celgene (<a href="http://vixandmore.blogspot.com/search/label/CELG">CELG</a>)</li> </ul> <p>I intentionally left off Google (GOOG), in spite of an excellent 2013, largely because this behemoth now has a $346 billion market capitalization and there are some limits on how quickly on organization this size can grow.</p> <p>With the inclusion of Baidu, the list reminded me a little of something I did back in October 2007, when I sensed a little too much froth in the stock market and created something I called the <a href="http://vixandmore.blogspot.com/search/label/OHFdex">OHFdex</a>, which began as a “watch list of Overripe High Fliers” and quickly evolved into an index designed to track 14 such stocks. When the markets turned down, the group was pummeled, with some <a href="http://vixandmore.blogspot.com/2008/10/ohfdex-one-year-later.html">spectacular crashes</a> from the likes of CROCS (<a href="http://vixandmore.blogspot.com/search/label/CROX">CROX</a>), Las Vegas Sands (<a href="http://vixandmore.blogspot.com/search/label/LVS">LVS</a>), DryShips (<a href="http://vixandmore.blogspot.com/search/label/DRY">DRYS</a>) and others.</p> <p>The current list is certainly filled with high fliers, but whether they are overripe or capable of soaring higher is not as obvious as it was in October 2007 – at least for me. For that reason, I will keep a close eye on the Halloween Monsters portfolio going forward, as their movements will likely be a tip off as to where the broader markets are headed.</p> <p align="center"><img src="http://i104.photobucket.com/albums/m163/bl82/HalloweenMonsters103113_zps9d158fef.png" /></p> <p align="center"><i>[source(s): Finviz.com]</i></p> <p>At the very least, I expect the stocks on this list to offer some interesting fodder for the archives, just as the OHFdex did in 2007 and 2008. Who knows, perhaps the next iteration of the OHFdex is just around the corner.</p> <p>For more on the OHFdex and similar flights of fancy, check out the links below.</p> <p>Related posts:</p> <ul> <li><a href="http://vixandmore.blogspot.com/2012/04/whither-social-media-stocks.html">Whither Social Media Stocks?</a></li> <li><a href="http://vixandmore.blogspot.com/2008/10/ohfdex-one-year-later.html">OHFDEX One Year Later</a></li> <li><a href="http://vixandmore.blogspot.com/2007/12/ohfdex-getting-killed.html">OHFdex Getting Killed</a></li> <li><a href="http://vixandmore.blogspot.com/2007/11/ohfdex-update.html">OHFdex Update</a></li> <li><a href="http://vixandmore.blogspot.com/2007/10/from-overripe-to-vulnerable.html">From Overripe to Vulnerable?</a></li> <li><a href="http://vixandmore.blogspot.com/2007/09/bidu-hogs-eventually-get-slaughtered.html">BIDU: Hogs (Eventually) Get Slaughtered</a></li> <li><a href="http://vixandmore.blogspot.com/2008/11/people-trading-bidu-also-traded.html">People Trading BIDU Also Traded…</a></li> <li><a href="http://vixandmore.blogspot.com/2009/01/four-horsemen-of-technology-running.html">Four Horsemen of Technology Running Strong Again?</a></li> <li><a href="http://vixandmore.blogspot.com/2008/07/biotech-on-tear.html">Biotech on a Tear</a></li> <li><a href="http://vixandmore.blogspot.com/2007/05/from-futures-to-pastures-and-more.html">From Futures to Pastures (an “And More” selection)</a></li> </ul> <p><b><i>Disclosure(s): </i></b><i>none</i></p> <img src="//feeds.feedburner.com/~r/VixAndMore/~4/1bsjeBo7Oms" height="1" width="1" alt=""/>Bill Lubyhttp://www.blogger.com/profile/01241003017364820134noreply@blogger.comhttp://vixandmore.blogspot.com/2013/10/halloween-monsters.htmltag:blogger.com,1999:blog-897456774486153841.post-27045113376884656962013-10-24T10:41:00.001-07:002013-10-24T10:41:44.201-07:00The New VXST and the VXST:VIX Ratio<p>At the beginning of the month several interesting announcements came out of the CBOE Risk Management Conference in Portugal. One which particularly caught my interest was the <a href="http://ir.cboe.com/releasedetail.cfm?ReleaseID=794060">announcement</a> of the launch of the new CBOE Short-Term Volatility Index (<a href="http://vixandmore.blogspot.com/search/label/VXST">VXST</a>), which is essentially identical to the VIX, except that whereas the VIX is looking ahead at a window of 30 calendar days, the VXST measures <a href="http://en.wikipedia.org/wiki/Implied_volatility">implied volatility</a> of options on the <a href="http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_500/2,3,2,2,0,0,0,0,0,0,0,0,0,0,0,0.html">S&amp;P 500 index</a> (SPX) for the next 9 calendar days. </p> <p>This means that the CBOE now has three different indices to measure implied volatility expectations in SPX options:</p> <ul> <li>9 days (VXST)</li> <li>30 days (VIX)</li> <li>93 days (<a href="http://vixandmore.blogspot.com/search/label/VXV">VXV</a>)</li> </ul> <p>The VXV has been a favorite subject of mine going back to my initial comments on the index and the <a href="http://vixandmore.blogspot.com/search/label/VIX%3AVXV">VIX:VXV ratio</a> I pioneered as an indicator back in December 2007. With the new VXST, investors now have a better gauge of volatility expectations to apply to time frames that are appropriate for <a href="http://vixandmore.blogspot.com/search/label/weeklys">weekly options</a>, which are on track to account for about 25% of all options trades by the end of the year.</p> <p>The launch of VXST options opens up a whole new set of possibilities, not the least of which is a <a href="http://vixandmore.blogspot.com/search/label/VXST%3AVIX">VXST:VIX ratio</a> that offers some possibilities as an indicator that are similar to those of the VIX:VXV ratio. In the chart below, I have mapped not the ratio of VXST:VIX, but the differential between the two indices. With VXST historical data going back to the beginning of 2011, it is worth noting that the VIX has been higher than VXST about 61% of the time. Typically, when volatility spikes, VXST spikes much higher than the VIX, with the bulk of the 39% of the instances in which VXST is higher than VIX occurring mostly during periods of elevated volatility.</p> <p align="center"><img src="http://i104.photobucket.com/albums/m163/bl82/VXST-VIX102313_zpsf58012b2.png" /></p> <p align="center"><i>[source(s): CBOE, VIX and More]</i></p> <p>I will go into much greater detail regarding VXST:VIX vs. VIX:VXV at a later point. For now it is worth noting that these ratios have some advantage to comparing the <a href="http://vixandmore.blogspot.com/search/label/VIX%20futures">VIX futures</a> <a href="http://vixandmore.blogspot.com/search/label/term%20structure">term structure</a> in that the indices focus on a fixed time period, while the days to expiration of the VIX futures is constantly in flux. </p> <p>Also of interest, the CBOE press release notes:</p> <blockquote> <p><em>“Plans call for CBOE and CBOE Futures Exchange, LLC (CFE®) to introduce VXST Weeklys options and futures. The launch dates for these tradable VXST products are yet to be determined, pending regulatory approval.”</em></p> </blockquote> <p>As compelling as VIX products are for trading, I can imagine that VXST options and futures might be even more attractive to certain types of traders. Also, if VXST futures gain some traction, I can envision ETPs based on these that might rival the interest in VXX at some point.</p> <p>In other words, this could easily turn out to be a huge development in the volatility space.</p> <p>Related posts:</p> <ul> <li><a href="http://vixandmore.blogspot.com/2013/09/revisiting-vixvxv-ratio.html">Revisiting the VIX:VXV Ratio</a></li> <li><a href="http://vixandmore.blogspot.com/2012/04/weekly-options-coming-on-strong.html">Weekly Options Coming on Strong</a></li> <li><a href="http://vixandmore.blogspot.com/2012/07/crazy-vixvxv-ratio-chart.html">Crazy VIX:VXV Ratio Chart</a></li> <li><a href="http://vixandmore.blogspot.com/2012/10/the-2012-vix-futures-term-structure-as.html">The 2012 VIX Futures Term Structure as an Outlier</a></li> <li><a href="http://vixandmore.blogspot.com/2012/01/vxv-heralding-return-to-normalcy.html">VXV Heralding a Return to Normalcy</a></li> <li><a href="http://vixandmore.blogspot.com/2011/04/chart-of-week-vxv-at-critical-juncture.html">Chart of the Week: VXV at Critical Juncture</a></li> <li><a href="http://online.barrons.com/article/SB124648899704482887.html">Take a Longer View on Volatility</a> <i>(Barron’s)</i></li> <li><a href="http://vixandmore.blogspot.com/2009/05/vixvxv-ratio-moving-toward-bearish-zone.html">VIX:VXV Ratio Moving Toward Bearish Zone</a></li> <li><a href="http://vixandmore.blogspot.com/2009/04/chart-of-week-vxv-and-systemic-failure.html">Chart of the Week: VXV and Systemic Failure</a></li> <li><a href="http://vixandmore.blogspot.com/2008/11/vxv-and-extreme-structural-volatility.html">The VXV and Extreme Structural Volatility Risk</a></li> <li><a href="http://vixandmore.blogspot.com/2008/02/vix-vxv-and-volatility-expectations.html">The VIX, VXV and Volatility Expectations</a></li> <li><a href="http://vixandmore.blogspot.com/2009/04/how-to-create-your-own-portable-vxv.html">How to Create Your Own Portable VXV</a></li> <li><a href="http://vixandmore.blogspot.com/2007/12/thinking-about-vxv.html">Thinking About VXV</a></li> <li><a href="http://vixandmore.blogspot.com/2009/11/vixvxv-ratio-availability-bias-and.html">The VIX:VXV Ratio, Availability Bias and Disaster Imprinting</a></li> <li><a href="http://vixandmore.blogspot.com/2008/02/vix-vxv-and-volatility-expectations.html">The VIX, VXV and Volatility Expectations</a></li> <li><a href="http://vixandmore.blogspot.com/2007/12/vixvxv-ratio.html">The VIX:VXV Ratio</a></li> </ul> <p><b><i>Disclosure(s): </i></b><i>short VXX at time of writing;<b> </b>the<b> </b>CBOE is an advertiser on VIX and More</i></p> <img src="//feeds.feedburner.com/~r/VixAndMore/~4/OZdMvluOEKM" height="1" width="1" alt=""/>Bill Lubyhttp://www.blogger.com/profile/01241003017364820134noreply@blogger.comhttp://vixandmore.blogspot.com/2013/10/the-new-vxst-and-vxstvix-ratio.html